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BBA Economic Digest: Difference Maker

The Big Differentiator

Yes, a community needs real estate "product" to compete for capital investment. It also needs supporting infrastructure. But the most important thing, that which differentiates a community from other places, is talent.

Human resources trumps all else in whether corporate investment will occur in any given place. The collective knowledge and capabilities of the U.S. workforce is worth an estimated $240 trillion -- four times more valuable than the country’s physical capital stock and ten times more valuable than all the urban land in the United States.

And yet here is the head scratcher -- certain places do not devote the needed resources or place a premium on vocational training/education/re-skilling, whatever you want to call it.

Economic development is in essence human development. It's about helping people help themselves gain access to economic opportunities. You can't do that if you don't provide people with the educational tools to succeed.

But there remains this disconnect -- I see it in so many places -- where educators and business people are not in concert with each other. Bottom line: If a community does not develop its workforce to meet the needs of employers and this Fourth Industrial Revolution, that community will fall behind.

Robots may not wholly replace America’s workers anytime soon, but new technologies will eliminate jobs in some industries while expanding jobs in others.

As the labor market splits more into low-wage and high-wage work, lower tier jobs are marked by unpredictable schedules, reduced benefits, and stagnant wages. Reskilling is one solution to support workers without leaving anyone behind.

An estimated 53 million people—44 percent of all U.S. workers ages 18–64—are low-wage workers. Their median hourly wage is $10.22, and their median annual earnings are $17,950.

Reskilling should be tailored to a specific community, targeting occupations that are expected to grow and likely to offer higher wages. To be inclusive, these programs need to meet workers where they are.

I was recently in a town of 35,000 that had been losing jobs and population for decades. The nearest community college where vocational training was available was 25 miles away. Not good.

The Future of Manufacturing

Manufacturers are on track to employ more college graduates in the next three years than workers with less education, according to an analysis of federal data.

“U.S. manufacturers have added more than a million jobs since the recession, with the growth going to men and women with degrees,” writes Austen Hufford with the Wall Street Journal.

“Over the same time, manufacturers employed fewer people with at most a high-school diploma.”

Manufacturing jobs that require the most complex problem-solving skills grew 10 percent between 2012 and 2018. But jobs requiring the least declined 3 percent in that same period.

“Investments in automation will continue to expand factory production with relatively fewer employees,” Mr. Hufford writes. “Jobs that remain are expected to be increasingly filled by workers from colleges and technical schools, leaving high-school graduates and dropouts with fewer opportunities.”

Improvements in manufacturing have made American factories more productive than ever and, despite recent job growth, require a third fewer workers than the nearly 20 million employed in 1979, the industry’s labor peak.

The DFW Keeps Booming

2019 was a very good year for the Dallas-Fort Worth area in terms of economic development recruitment wins. Some companies came with plans to open regional hubs, while others have moved or will move their entire corporate headquarters to the DFW.

More than one came from the San Francisco Bay area. From late 2018 through the end of this year, McKesson Corp., Core-Mark and Charles Schwab announced they would either be moving, or had moved, their corporate headquarters from the Bay Area to what some what some call the Metroplex. (Some wince at that moniker.)

Ride-sharing giant Uber didn't abandon its San Francisco headquarters, but did announce an expansive regional hub in the Deep Ellum District to accommodate up to 3,000 employees.

Other notable DFW projects in 2019 include PGA of America, which plans to move its headquarters from Palm Beach Gardens, Florida, to Frisco by mid-2022.

Fort Worth won three notable corporate headquarters relocations -- KT&G Corp., the fifth-largest tobacco firm in the world; Mid-States Distributing Co., a multi-billion dollar retailer; and Chip 1 Exchange, an electronics components distributor out of Southern California serving aerospace, medical, automotive, and defense industries.

Speaking of Fort Worth

Good things are happening there. The city, which unlike Dallas embraces its westerm culture, leaped over Columbus, Ohio, and San Francisco to become the 13th-largest city in the nation.

Barry Albrecht, a member of the BBA team specializing in corporate site selection for defense contractors, and I recently attended an economic development briefing hosted by the Fort Worth Chamber.

Albrech has a particular interest in Fort Worth. The reason: Tarrant County, where Fort Worth sits, is second in the country for defense spending at $13 billion, just behind Fairfax County, Virginia with $13.7 billion.

Lockheed Martin Aeronautics headquarters is based in Fort Worth. The company's F-35 fighter jet program may very well be the largest economic stimulus in Texas, with an estimated annual impact is $5.3 billion.

Lockheed employs 9,500 in Fort Worth, but the total direct and indirect jobs because of the F-35 program at more than 40,000.

Chris Strayer, who heads economic development for the chamber, said his organization currently has 85 projects in the pipeline, entailing more than 16,000 jobs. Keep in mind, communities win only a fraction of projects that they compete for.

Nearly 5,000 new jobs have been added due to projects involving the Chamber since January 2018. They included food service distributor Ben E. Keith, Mid-States, a multi-billion retailer; Chip 1 Exchange, a distributor of electronics components; Sally Beauty; Panoramic Doors; Aeromax; Stanley Black & Decker; KCF Technologies; and American Specialty Health.

Talk About a Load

A study by the IZA Institute of Labor Economics entitled “Bullshitters: Who Are They and What Do We Know about Their Lives?” has delved into the backgrounds of people who habitually claim knowledge or expertise in areas where they actually have little experience or skill.

Quoting from the report (I am not making this up): "Bullshitting is a well-known social phenomenon. It can be summarized as a situation where an individual claims to have knowledge, experience or expertise in some matter, when really they do not.

"The label “bullshitter” is then assigned to someone who makes such claims on a regular basis; i.e. a person who consistently exaggerates their prowess and/or frequently tells untruths. Although this concept is well-known in everyday life – we all probably know a bullshitter – very little academic research has been conducted into this issue."

In my experience, economic development consultants are undoubtedly the most egregious offenders. The data suggest that they might not be consciously lying, but are instead weaving their own fantasies.

Real Estate for Economic Developers: A Primer

We use the terms land, real estate and real property interchangeably but there are actual differences in the meaning of each.

Believe it or not, land is the surface of the earth extending downward to the center of the earth and upward into infinity. (Sounds crazy, I know.) Real estate includes all that is encompassed in land, with the addition of all made-made additions/improvements such as roads, houses, buildings.

Real property goes beyond the physical and includes rights in the land, also known as the "bundle of rights." These rights of ownership include possession, control, exclusion, enjoyment, and disposition.

But, but, but: Rights are severable, meaning that more than one person can own different rights (water, mineral, air) to the same piece of land. Here in Texas where I live, many people do not own the subsurface (mineral) rights to their property.

Because of the prominence of the oil and gas industry in Texas, the subsurface rights are dominant over surface rights. The determination of subsurface ownership, rights and interest can be complex, meaning lawyers are often involved because money is involved.

What We're Reading

Site Selection in 2020: The Squeeze is On Bisnow

What was the big story in economics over the last decade? Brookings

All Robot Dogs Go to the Cloud BuzzFeed

The conundrum affordable housing poses for the nation Washington Post

The science stories likely to make headlines in 2020 Science Magazine

An Amazon Warehouse Town Dreams of a Better Life New York Times

Lessons on the Ice

It's been 100 years since Ernest Shackleton published "South," the gripping memoir of his against-all-odds trek to safety with his crew after his three-masted sailing ship, the "Endurance," was crushed by pack ice in a mission to Antarctica.

Ostensibly, the Shackleton expedition, from 1914 to 1916, was a colossal failure. The Endurance never reached Antarctica. None of his men stepped foot on the continent.

But it is also a compelling story of leadership when disaster strikes again and again. What began as a mission of exploration quickly became a mission of survival.

Shackleton is widely studied at management programs like Harvard Business School because saw his men through months of privation and desperation, and brought each of them home alive.

During their exhaustive journey, men who broke down emotionally were comforted and inspired by Shackleton who would pull them aside for private walks during which he would seek their "advice" and take their motional temperature.

"Shacks" turned despair into hope by inspiring the sailors to tell their favorite yarns and describe the meals they planned to relish once they got back to England.