The International Economic Development Council’s (IEDC) 2019 Leadership Summit was held in unexpectedly cool and rainy Fort Lauderdale from January 26-29. The Leadership Summit occupies a unique position in IEDC’s conference line-up. Not only is it the first event of the year, it is aimed at the most senior members of the profession. It also sets out a broad economic development agenda for the coming year. In the spirit of the conference, I’d like to highlight issues likely to concern economic development organizations (EDOs) throughout 2019.
Amazon HQ2 (and other “Big Deals” – looking at you Foxconn!)
The search for a second Amazon headquarters was wrapped at the end of 2018 with the co-selection of Northern Virginia (Crystal City) and New York City (Queens). But Amazon’s decision hardly signaled the end of the discussion. Economic developers remain divided over the implications of the open-bid process. Did it change the incentive game entirely? Is the site selection model permanently disrupted? Did Amazon open the flood gates to bidding wars for large projects? These questions were hot topics both in formal sessions and during networking events.
And it is not Amazon alone driving the discussion of incentives. At the end of January, the Taiwanese tech giant Foxconn (Apple supplier and screen producer) first announced that its manufacturing presence in southeast Wisconsin would be scaled back and then reversed its position after discussions with President Trump. The reversal draws further attention to the unprecedented incentives directed at Foxconn by the State of Wisconsin and Racine County. Already under scrutiny, these subsidies are now likely to be an even greater point of contention.
Those of us in the profession who have questioned expectations around manufacturing employment growth are not surprised. The shift to engineering and design remains a net positive for Milwaukee, Madison, and even Green Bay, but is problematic for the communities expecting a manufacturing resurgence.
The Talent Crisis Unabated
Just as highlighted at the 2018 Leadership Summit, a lack of available “talent” remains the top concern of employers – both small and large – throughout the entire country. EDOs are all looking for talent recruitment and retention strategies that will meet the needs of companies desperately looking for workers. In a discussion led by TIP, we suggested that when we use “talent” as a synonym for workforce, we are really saying that we want specific skills, higher levels of education, and proven commitment.
This definition of talent (rather than using the more traditional description of “workforce”) may help explain why the problem faced by businesses (and communities) is so daunting. The combination of skills, education, and commitment means the actual pool of workers does not align with the needs of businesses. It also highlights the problem of growing income disparity. Job growth tends to be concentrated in low skill occupations (such as retail sales) and in high skill professions (such as software developers). By contrast, middle skill jobs, especially in manufacturing, have not experienced the same level of growth. The structural dynamics of job growth across high, middle, and low skill occupations alone can exacerbate income inequality. This story is exactly the one playing out with the Foxconn decision cited above.
Creative solutions to the talent crisis have to include a broader understanding of who is in the workforce (a session on the gig economy highlighted that) and the role of place-making as essential to talent attraction.
Championing Economic Development
By no coincidence, the need to champion economic development to an often skeptical public was not only a main theme for 2019, but also the subject of an Economic Development Research Partners (EDRP) report.
The massive incentive deals around Amazon and Foxconn make it imperative that economic developers better communicate why their proposed incentives provide community-wide benefit. Birgit Klohs of The Right Place (greater Grand Rapids) and Craig Richards (Tampa Hillsborough Economic Development Corporation) led a lively discussion on recasting the incentive discussion as one focused on community investment. No question that this approach is viable, but only if the EDO actually thinks in those terms. If the goal is simply to “attract jobs” the case is difficult – or even impossible – to make. The discussion raging in New York City is further evidence of the stress faced by economic developers (not to mention representatives from Amazon, such as our friend Holly Sullivan).
Not surprisingly, the current political climate was a topic of obsessive interest. Here too, the EDRP report provides useful insights. I was particularly struck by my discussion with one senior staff member from a metropolitan area EDO who maintained that their organization would stop characterizing itself as “apolitical.” Her point was that it is not possible – and certainly not realistic – to be considered apolitical. Instead, they now characterize the organization as “nonpartisan.”
This distinction strikes me as exactly right. Major federal policy positions – political positions – are not ones that the profession can, or should, avoid. Immigration. Trade. Social issues. These are all real and immediate topics that press upon businesses in their supply chain management, their hiring, and their expansion and location decisions. It is to the IEDC’s credit that we are willing to air these topics and do more to engage businesses in ways that go beyond incentive discussions.
Finally, we would be remiss if we failed to mention the in-coming chair of the IEDC Board of Directors, Tracye McDaniel. We see her leadership as one that promises dynamism and clarity of purpose. Of course, the merger of her firm with TIP Strategies has us heavily invested in her success.
From our perspective, greater engagement with corporations and the all-important interface with EDOs and broader community interests will drive our company and our own sense of purpose in the coming year.