BBA Economic Digest

November 3, 2019

A Balanced Approach to Economic Development

 

Economic developers focus much if not most of their attention on industry recruitment, with manufacturing, almost by default, a primary goal.

 

If you look at identified target industry groups on economic development websites, chances are that a majority will be manufacturing sectors. Automotive, aerospace, food processing are prime examples.

 

Once a powerhouse of the U.S. economy, manufacturing made up about a quarter of gross domestic product in the 1960s. It was largely responsible for building and sustaining communities and a middle class. But that's the way it was.

 

The Commerce Department reported last week that manufacturing made up 11 percent of GDP in the second quarter, the smallest share since 1947 and down from 11.1 percent  in the prior period. That compares with 13.4 percent for real estate, 12.8 percent for professional and business services and 12.3 percent for governments, according to the figures on GDP by industry.

 

Workers employed in manufacturing  now make up about 8.5 percent of the overall employed workforce, down from around 13 percent two decades ago. There are now more local government employees than factory workers.

 

I am not suggesting that economic developers should abandon business recruitment of manufacturing. Far from it. Manufacturing jobs typically pay better and create usually four-to-one indirect jobs in related service industries.

 

What I am suggesting is that a balanced approach to economic development that includes business retention and expansion, where most new jobs are created, and entrepreneurial development will reap the greatest rewards. Try it. You just might like it. (And BBA can help.)

 

A Long View on Immigration

 

Population growth has slowed, the number of prime working age people is stagnating, the country is aging and entrepreneurship is declining. Those are the inescapable facts, but I submit that there is an economic development solution.

 

It is "heartland" visas -- a pathway for skilled immigrants to come to the United States. Eligible communities would host visa holders, who would provide a much-needed human capital and entrepreneurial vitality.

 

Immigrants are twice as likely to start businesses as those born here, according to the Harvard Business Review. While 13 percent of the U.S. population was born outside the country, immigrants represent 28 percent of the country’s Main Street entrepreneurs. And yet, these days, immigrants are often vilified, and entrepreneurship is declining.

 

New research from the National Bureau of Economic Research shows that children of poor newcomers to the U.S. have had greater success climbing the economic ladder than poor children born here. The finding that those who arrive in poverty often escape it challenges several arguments central to the current debate over immigration. Above, Ellis Island, 1912.

 

The short-term perspective of politicians might "underestimate the long-run success of immigrants,” said one of the paper’s authors, who are historians at Princeton, Stanford and the University of California. “By the second generation, they are doing quite well.”

 

Tweeted one of the researchers: "Our findings supports idea of “American Dream” -- even immigrants who come to the United States with few resources and little skills have a real chance at improving their children’s prospects/end."

 

Economic developers tout the importance of attracting foreign investment, as well they should, but they often do not connect it to immigration. Indeed, there is a growing body of evidence that shows foreign firms prefer to locate in communities where there is a thriving immigrant population.

 

10 Questions for Economic Developers

 

It's good to do a periodic, how-are-we-doing gut check in business. Here are 10 questions that I think all economic developers should periodically ponder:

 

1. Does my community regard economic development as critical?

 

2. Does our economic development organization have sufficient resources to win?

 

3. Does our EDO take the previously mentioned "balanced approach" to economic development or does it concentrate too much in one area? 

 

4. Have we developed winning value propositions for our different target industry sectors?

 

5. Do we have an effective business retention & expansion program?

 

6.) Are we devoting time and resources to entrepreneurial development?

 

7.) Have we developed and launched any new initiatives that creates jobs and/or investment?

 

8.) Are we accessing and capitalizing on our community allies?

 

9.) Is our EDO team motivated and willing to try new things?

 

10.) Have our local elected officials helped or hampered our economic development initiatives?

 

Sometimes economic developers are too close to the situation to always objectively answer these questions. Sometimes they need a third party to help them figure this stuff out. That's where we at BBA come in.

 

 

Women-Owned Businesses Soaring

 

The total number of businesses headed by women in the United States soared 21 percent between 2014 and 2019 to nearly 13 million establishments, compared to overall business growth at just 9 percent during the same period, according to a recent study by American Express.

 

The 2019 State of Women-Owned Businesses Report states that during that same time period, revenues generated by women led companies climbed 21 percent to nearly $2 trillion, while the jobs they created rose by 8 percent to 9.4 million.

Both growth totals eclipse the national average for companies headed by executives of either gender, the report stated.

 

Between 2014 and 2019, the number of women-owned businesses climbed 21 percent to a total of nearly 13 million. The share women-owned businesses represent of all businesses has skyrocketed from a mere 4.6 percent in 19721 to 42 percent in 2019.

 

"The economic impact of women-owned businesses is undeniable, from the trillions (of dollars) they contribute via revenue to the millions of jobs they provide," Courtney Kelso, senior vice president of American Express, said in a statement accompanying the report.

 

One interesting aspect of the American Express report is that of “sidepreneurs,” part-time entrepreneurs who work fewer than 20 hours per week on their businesses. The growth rate of sidepreneurship for women between 2014 and 2019 has been far greater than for all women-owned businesses: 39 percent vs. 21 percent.

 

By far, the highest growth rate in the number of sidepreneur ventures has been among African-American women -- triple that for all businesses. It's good to dream big, but launching your businesses on the side, while keeping your paid, full-time job, is usually a smart way to start.

 

Women are often more likely than business owners in general to see a need in the market and to start a company to fill it.

 

"This should bode well for the U.S. economy, but women face more obstacles than entrepreneurs in general when starting and growing their businesses. Eliminating barriers that thwart the success of women-owned businesses is an economic imperative that can spur innovation and improve productivity, which will create jobs, build wealth and grow the economy."

 

 

A Growing Distrust of Capitalism

 

It's an eye-opening picture -- 50 percent of millennials and 51 percent of Generation Z have a somewhat or very unfavorable view of capitalism, according to a recent poll by The YouGov–Victims of Communism Memorial Foundation.

 

Also, the share of millennials who say they are "extremely likely" to vote for a candidate who identifies as a socialist doubled. Nearly half of Gen Z and millennial respondents said they felt the U.S. economic system has worked against them -- more than other generations. 

 

Many are burdened with college debt, have seen little wage growth and face the threat of job loss due to automation.

 

Capitalism is still viewed more favorably than other economic systems, holding relatively steady at 61 percent favorability from 2018, pollsters found. However, the survey found that millennials do not have as many negative connotations about socialism and communism as older generations who lived through the Cold War.

 

Only 7 percent of Baby Boomers said they had at least a "somewhat favorable" view of communism. The YouGov–Victims of Communism poll surveyed 2,100 U.S. respondents over the age of 16 and has a margin of error of plus or minus 2.4 percentage points.

 

 

A Growth Corridor in Central Texas

 

There are certain places that seem destined to grow. More often than not, they are exurbs, communities beyond the suburbs and on the outskirts of large metro areas.

They typically retain their small-town, even rural feel and exhibit a pro-business, pro-growth attitude. They are among my favorite places to visit.

 

Such was the case this past weekend, when I was one of four consultants invited on a "fam tour" of Hays and Caldwell counties. While in the Austin metropolitan area, the economic developers here view their communities as somewhat separate and apart -- a less expensive, less bureaucratic, a less hectic alternative.

 

Served by the Greater San Marcos Partnership, the two counties, with a population of about 265,000, sit roughly midway between Austin and San Antonio. The 75-mile stretch of of Interstate 35 between these two major cities is referred to as the Texas Innovation Corridor, and the two counties have fully embraced that moniker. Both Hays and Caldwell have experienced rapid population and job growth.

 

Hays County is comprised of San Marcos, Buda (home of the annual Buda Weiner Dog Races), Dripping Springs (an International Dark Sky Community) and Wimberly, while Lockhart (known as the Barbecue Capital of Texas, but much more) and Luling are the principle communities in Caldwell County.

 

(The picture above was taken on the square in Lockhart, and not Abbey Road in London.) San Marcos, the county seat of Hays County, also has a picturesque and vibrant town square.)

 

Before I go further, my consultant compatriots were John Butler, Pegasus Partners, Nashville; Jerry Szatan, Szatan & Associates, Chicago; Bob Westover, Colliers International, Chicago.

 

Texas State University, based in San Marcos, is no doubt a catalyst for the transformation of this region and is probably the region's most important asset. This majority-minority student base university (nearly 39,000 students) is all about preparing young people for a future world of work.

 

Ingram Hall opened last year and is the new home for the College of Science and Engineering's electrical engineering, industrial engineering and manufacturing engineering programs. We did a short tour and the can-do/work-ethic attitude demonstrated by the students was inspirational. (Many if not most of the students are the first in their families to go to college.)


One of the main attractants and lure to living in San Marcos is something to experience to truly appreciate. It is, in fact, the water. Archaeologists now believe San Marcos to be the longest continuously occupied community in North America due to the presence of about 200 springs in small localized area.

 

A dam just downstream from the springs was built in 1849 creating the crystal clear Spring Lake, now a protected area used for research and where the water temperature remains 72 degrees year round. Downstream and fed by the lake is the equally crystal clear San Marcos River. I've never seen anything quite like it.

 

Other regional assets include Austin Community College-Hays Campus, which provides training, certificate and two-year associates degrees. Technical training in the region is also provided by Gary Job Corps, the largest job corps facility in the nation with an enrollment of about 1,200 students.

 

Surprise, Arizona Gets BNSF Site Certification

 

I am so very pleased to see that the City of Surprise, Arizona, has attained BNSF Site Certification status for two 150-acres properties. Working closely with the city and the the railroad, BBA oversaw and managed the process that lead to the certification.

 

The two sites -- Cactus Commerce Center and Summit Business Park -- comprise Southwest Railplex. The properties are ideal for industrial use with great access in a great community in the Phoenix metro area. To learn more about the properties, click here.

 

Special thanks to Shauna Stagner with BNSF Railway, Jeanine Jerkovic, Samantha Pinkal, with the City of Surprise, and Kelsey Lamphier, formerly with the city. I'm only glad that I was able to help.

 

Economic developers and local policymakers should understand that land is not a necessarily a site, but it can be turned into a viable, certified site with investment, giving a community a significant competitive advantage.

 

BBA's site certification/readiness program takes a community through a process of documentation, showing that a subject property or properties is controlled and available, fully served by utilities, and can be developed on a fast-track basis for industrial use.

 

While we gladly assisted BNSF in Surprise with the company's comprehensive site certification process,  which we helped develop, BBA offers a separate site certification/readiness program nationwide. Rail service is not a prerequisite.

 

The site certification takes time (four months in the case of Surprise), effort and some expenditures from the community. Professional service providers may be needed to complete the level of documentation required. To learn more, let's talk.

 

What We're Reading

 

Why Millennials Are Skipping Church and Not Going Back  

The Washington Post

 

Why Silicon Valley Should Take Senator Josh Hawley’s War on the Industry Seriously.  Recode

 

How Does the Human Soul Survive Atrocity?  The New York Times Magazine

 

The Particular Creativity of Dense Urban Neighborhoods  CityLab

 

Even Nazi Prisoners of War in Texas Were Shocked at How Black People Were Treated in the South  Medium

 

What's Blockchain Actually Good for, Anyway? For Now, Not Much  Wired  

 

Parting Thoughts: Barbecue is King in Central Texas

 

Never have I been so relieved, so soothed, so filled with inner peace and joy as to learn several weeks ago that international researchers had concluded that red meat would no more kill me any faster than, say, broccoli.

 

I took that to heart on the second night of my "fam tour" of Hays and Caldwell counties in Texas, when our dutiful hosts from the Greater San Marcos Partnership took us, a group of four consultants, to Salt Lick BBQ in Driftwood, where the primary cuisine is beef (brisket), sausage, and pork ribs. That night, my vegan diet be damned.

 

Being the only Texan among the consultants, albeit one from uppity Dallas, I had been to Salt Lick several times. And it just so happens that Central Texas barbecue, which is different than that made in other parts of the state, is by far my favorite.

 

Central Texas pit-style barbecue was established in the 19th century along the Chisholm Trail in the towns of Lockhart (known at the Barbecue Capital of Texas), Luling and Taylor. The German and other European immigrants who owned meat-packing plants opened retail meat markets serving cooked meats wrapped in red butcher’s paper, a tradition that still continues today.

 

Many Central Texas barbecue restaurants open at 11:00 am and keep serving until they are plumb out of meat. On more than one occasion, my wife and I have arrived at some of our favorite haunts too late, only to smell what we could have eaten. It's a tragic feeling.

 

Here, the emphasis is on the quality and the cooking of the meats. In the photo above, notice the fire on the floor, which is common. 

 

You can talk about your Kansas City, Memphis and Carolina barbecues all you want. They are no doubt fine local cuisine. But for my money, Central Texas barbecue is still the king.

 

 

 

Three Chords and the Truth (Click and Ye Shall Find.)

 

 

 

 

 

 

 

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