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BBA Economic Digest

One Way to Attract Talent: Buy It

When skilled workers and firms in a similar industry are located near one another, it’s much easier to find talent with specialized knowledge.

These people will for the most part stay in the area, and go from one job to another, because the opportunities exist there.

That in a nutshell is how industry clusters form, something that we talk about in BBA EconDev 101, a crash course for community stakeholders.

Success builds upon success, which explains why companies are attracted to certain places and avoid others. Few want to be the brave pioneers. Because of that timidity, some smaller markets have figured that if you can't beat 'em, buy 'em, as in buy the talent.

Vermont reimburses people up to $10,000 for relocation costs, office equipment, as well as in-kind perks like a membership to a co-working space.

Last year, the George Kaiser Family Foundation began offering remote workers $10,000 in relocation and living expenses to move to Tulsa, Oklahoma. Ten thousand people applied and 100 were chosen.

In a push to increase its number of college-educated residents, Hamilton, Ohio, is offering young professionals a cash incentive of up to $10,000 to relocate there. The money is paid out in increments of $300 a month via a fund called the Talent Attraction Program Scholarship.

Buying talent won’t create the next Silicon Valley, but I do subscribe to the theory that a certain level of talent can attract more talent.

Economic development is hard. But you knew that.

Think This Through

There are 8,762 census tracts in this country designated by the US Department of Treasury as Opportunity Zones.

Now consider there are certain consultants charging economic development organizations sizable upfront fees to "market" and/or "promote" their OZ properties.

Presumably, these consultants are saying, "Hey, we know some people."

Well, I know people, too, but I would never charge an ED group an upfront fee on the guise of finding them a taker. Sorry, homie don't play that game.

Opportunity zones pose real advantages to investors, no question about that. But on a smaller scale, the same could be said for industrial parks, albeit for different reasons. The goal is the same -- having someone build in a designated area and create jobs.

Question for economic developers: Do you pay somebody to "promote" your community and/or your properties? I'm just asking.

Bottom line: Be careful. Think this through.

First Dibs

Many cities have workforce development programs to prepare people for jobs, but Detroit took it one step further in its deal with Fiat Chrysler to build a new, $1.6 billion assembly plant and invest $900 million to retool and modernize another.

In exchange for getting land and tax breaks, Fiat Chrysler is obligated only to consider Detroit residents for the work before opening up the jobs to others.

"I sat with FCA (Fiat Chrysler) and I said this: 'I'm going to give you want you want,'" Mayor Mike Duggan said. "We clear the land and give it to them. I want a window where Detroiters apply for the jobs first. No one in this country has ever got the preference."

Personal note: Earlier this summer, I was on the FCA construction site in Detroit. This project, the first assembly plant to be built in the city in 30 years, will be a huge boost to the local economy and confidence in Detroit.

Our Second Acts

I recently attended a dinner in Dallas given by the East Texas I-20 Corridor Consortium, a group of economic developers who have smartly banded together to work as a region.

What struck me during the evening was what Andy Levine calls the "Second Act Stories" sitting at my table. There was a former psychologist who closed her practice to concentrate on real estate development. There was a real estate broker who was a former cop. Another broker once sold insurance.

I had made a career in journalism. My first job after college was as a police beat reporter going to crime scenes. That was a wake-up call to a side of life that I'd never been exposed to before. Later I would become a business reporter and then business editor of a metro daily newspaper. After 20 years in newspapers, I went into economic development.

As an economic developer, I met my first consultants, or what one economic developer at the dinner referred to as "insultants." I had no idea that I would ever actually become one -- a consultant, that is. I hope I'm not viewed as an "insultant," although I'm capable of being a bit too frank sometimes in my assessments.

If you want to hear how people make big transitions in their lives, listen to Andy's podcast called Second Act Stories. It's great stuff.

By the way, the East Texas I-20 group, comprised of EDCs in Athens, Canton, Kilgore, Lindale, Mineola, Longview, Tyler and Wills Point, is a great bunch of folks.

First They Came For ...

The Trump administration’s new policy, which could deny green cards to legal immigrants who use Medicaid, food stamps or some other kinds of public assistance, apparently is based on the belief that immigrants take more than they contribute.

But the truth is that immigrants contribute more in tax revenue than they take in government benefits. A report by the National Academies of Sciences, Engineering, and Medicine found immigration “has an overall positive impact on the long-run economic growth in the U.S.”

It is true that first-generation immigrants cost the government more than native-born Americans, according to the report -- about $1,600 per person annually. But second generation immigrants are “among the strongest fiscal and economic contributors in the U.S.,” contributing about $1,700 per person per year, compared to $1,300 per year on average by native-born Americans.

Less-educated immigrants, which the new policy would target, tend to work more than people with the same level of education born in the U.S. Non-citizens make up a fraction of those getting Medicaid and food assistance: 6.5 percent and 8.8 percent, respectively, according to the Associated Press.

My take: We're on a slippery slope when our government targets legal immigrants. Think of all the stories we've heard from prominent people, business icons, who tell of an ancestor coming to this country penniless and building a life for themselves. Perhaps you have such an ancestor.

The American Dream, hard as it may be to achieve these days, is not and should never be an exclusive club. That's my take.

A Racial Wealth Gap That Hurts Us All

The persistent racial wealth gap in this country is a burden on everyone. It not only limits the economic power of black people, but entire communities, states, and the nation as a whole.

The racial wealth gap dampens consumption and investment and will cost the US economy between $1 trillion and $1.5 trillion between 2019 and 2028 -- 4 to 6 percent of the projected GDP in 2028, according to a new report by McKinsey & Company.

The 16 states where black residents are concentrated are well below the national averages in economic opportunity, employment, healthcare access, healthcare quality, public health, and access to broadband. This is a huge problem that economic developers, educators, and elected officials must face.

Ultimately, economic development should be about economic opportunities for all people.

Said Duwain Pinder, one of the authors of the McKinsey report: "One of the most harmful ideas is that racial equity is a zero sum game, and this false idea says that when I win, you lose. I'm excited to debut our new report that shows how much we all have to gain by remedying the racial disparities that exist. Let us win, together."

Do You Understand the Words Coming Out of My Mouth?

For a long while, I've been advocating that economic developers do more than provide links to the local community college in terms of highlighting vocational education/training.

Most economic developers nod and say, "Yeah, that makes sense." And then nothing happens. Well, my friend Corey Mehaffy, executive director of Hannibal Regional Economic Development Council, listened and then he acted.

His website breaks it down and shows the curriculum for the Moberly Area Community College and the Hannibal Career and Technical Center. Now that's what I'm talking about.

Any prospective company can now do a deep dive to specifically see what courses are actually being taught. It's not hard to do, and yet I seldom see it on economic development websites.

Bottom line: Just do it. Don't worry, I won't send you an invoice.

An Abusive Practice

For 23 years, I lived in Birmingham, Ala., the county seat of Jefferson County. Back in April, elected officials in 22 cities in Jefferson County announced an economic development pact pledging that they would not "poach" businesses from one another.

Fast forward to four years ago. I met with a local economic developer here in the Dallas-Fort Worth metro for coffee. He asked if I might target companies in the DFW that would consider moving to his city. They would be rewarded with generous incentives. I passed on his offer.

Last year, I documented several instances here in the DFW, in which companies were given millions of dollars to move only a few miles, from one jurisdiction to another. No job creation, same workforce, just a different address for workers to commute to.

Note that I have no problem with companies moving to wherever. That's freedom. Nor am I philosophically opposed to incentives. But "poaching" is an abusive practice of economic development.

It's happened the Kansas City metro area, which straddles two states, to such an extent that it was dubbed the "border wars." Poaching probably happens in many places that we just don't hear about. I commend the governors of Kansas and Missouri for coming up with this agreement.

Wouldn't Be Prudent

Decatur, Ala., sits along the Tennessee River, in North Alabama. It is the county seat of Morgan County, which has a diverse industrial base that includes food processing, chemical, engineering, automotive, and aerospace/defense companies.

It is the home to Big Bob Gibson Bar-B-Q, founded in 1925, one of the best barbecue joints in the South.

That said, Decatur has no desire to be known as "A Little Different."

The city council rejected a proposal from a consultancy that the city adopt the new slogan "A Little Different."

“Decatur is not Austin, Texas, and I’m not sure if we’re ready for something that," Councilwoman Kristi Hill told The Decatur Daily.

Birmingham-based Big Communications was told to go back to the drawing board.

What We're Reading

Is this heaven? No, it's Iowa. Pop Culture

The West is trading water for cash. Bloomberg

Elder boom and worker shortage in Maine is a preview of the nation's future. Washington Post

How segregation caused your traffic jam. New York Times

Nuclear plant where the US flirted with its own Chernobyl to close. Bloomberg

The governor of Texas said San Antonio could teach Austin how to help homeless people. Experts disagree. Texas Tribune

A better address can change a child's future. New York Times

Parting Thoughts

We leave you with two parting thoughts, from 1966 and from today:

The song, "For What It's Worth," was written by Stephen Stills and recorded by the group Buffalo Springfield in December 1966. Lyndon B. Johnson was president in 1966. That same year, the first Acid Test was conducted at the Fillmore, in San Jose, Calif. A significant buildup of U.S. forces was taking place in Vietnam despite little progress, and Time Magazine's cover story asked "Is God Dead?"

"There's something happening here. What it is ain't exactly clear," wrote Stills.

Fast forward to today. Greg Ip, chief economics commentator with the Wall Street Journal, believes he knows what is happening:

"The world learned in the early 1970s that the era of cheap oil was over, in the early 1980s that countries could default, and a decade ago that American mortgages and global banks aren’t safe. Today, a similar rethink of globalization is under way.

"From Washington to Buenos Aires, nations’ mutually reinforcing commitment to open markets is disintegrating. In response, investors are rearranging portfolios, businesses are rethinking investments and policy makers are struggling to respond—all of which are pushing the global economy closer to recession."