Amazon’s highly visible search for a second headquarters has offered one tremendous public benefit: it has raised public awareness of what bad economic development is. Even Saturday Night Live satirized the lengths to which local officials will go to woo a major company, which include offering massive amounts of taxpayer subsidies, despite dubious economic returns.
But if attracting Amazon and other companies is not the right way to create jobs, then what is?
To start, it’s easy to understand why local leaders pursue these business attraction deals: economic development isroutinely mayors’ top policy priority, as new jobs can boost local employment rates, raise residents’ incomes, stabilize city budgets, and revitalize distressed neighborhoods. Landing a flashy new business headquarters is great PR, a highly visible way to show that leaders are directly helping local economies. This leads state and local governments to spend an estimated $45 billion on economic development subsidies and incentives each year, even when they rarely factor into corporations’ final decisions.[…]
North Carolina state government has fallen all over itself for Dell, BMW, another auto plant, Amazon, Google, and — of course – Apple.
[…] All this attention lavished on business recruitment overstates their importance to total job creation. One study by the Center on Budget and Policy Priorities estimates that attracting out-of-state businesses accounts for just 3% to 14% of all jobs created in a state each year.Furthermore, evidence suggests that the pipeline of corporate relocations is drying up, leading to spiraling subsidies for the few mega deals that do emerge.
Meanwhile, a mountain of research suggests that the bulk of job creation happens elsewhere. The Kauffman Foundation notes that fast-growing startups play an outsized role in job creation.Economist Gary Kunkle emphasizes the importance of “sustained growth” companies of all sizes, which add jobs steadily over several years, rather than in a single massive expansion. Other researchers, including Enrico Moretti, Michael Porter, and my colleague Mark Muro, point to the power of clusters — especially in tech-based advanced industries — for regional job creation. They note that close proximity to competitors and suppliers allows companies to share talent, supply chains, and infrastructure, leading to more innovation, growth, and spillover benefits in the form of new local jobs.
In short, the bulk of job growth comes from empowering existing people and businesses in a community to grow, innovate, and start new ventures. Local leaders and voters should demand this kind of good economic development, which then attracts other firms that want to be part of a dynamic local business environment.[…]
*CAN I get an Amen ???*
[…] As the competition for Amazon’s second headquarters heats up in the remaining months, the real winners will be the cities that play in the game that counts—growing an inclusive, sustainable economy that invests in homegrown people and businesses.