A healthy approach to economic development

http://www.statehousereport.com/2016/02/12/state-needs-better-balance-on-economy/

15 Feb A healthy approach to economic development

State needs better balance in growing economy

Statehouse Report
February 12, 2016

By Andy Brack

The traditional way states grow jobs is to lure new plants and investment from outside. But that strategy is being challenged by community developers who say it’s smarter to grow from within.

A new report by the Center on Budget and Policy Priorities says states should build strong economies by focusing on “producing more home-grown entrepreneurs and on helping startups and young, fast-growing firms already located in the state to survive and to grow, not on cutting taxes and trying to lure businesses from other states.” The study says new data show home-grown jobs comprise about 80 percent of total jobs created in states.

“Every Southern state is engaged in an expensive competition for big projects that often don’t deliver what they promise, that cost more than they produce, and which diminish and disappear over time,” said Arkansas Rep. Warwick Sabin, executive director of the Arkansas Innovation Hub. “A much more efficient and effective strategy is to invest in our own people to help them develop the talent and skills to build their careers and businesses at home.

“Those jobs are cheaper to create and much more likely to grow over time and remain in place for the long term. It may not garner headlines and photo-ops, but it is the most solid and sustainable way to build an economy.”

Conaway Haskins III, who runs the Virginia Community Economic Network in Richmond, agrees, noting more than seven of eight South Carolina businesses have five or fewer employees.

“These companies make up the backbone of local economies all over the state, and these small business owners are often some of the most active citizens in local communities,” he said. “If these small ‘Main Street’ companies were provided with the resources to enable them to add just one new worker to their payrolls, it would create over 300,000 new jobs for South Carolinians.”

Haskins said supporting existing businesses would be less expensive than spending millions of dollars on tax incentives and breaks to recruit out-of-state companies.

“Helping South Carolina’s small businesses add just one new job would dramatically reduce unemployment, lower the poverty rate and expand economic opportunity for everyone,” he said. “Entrepreneurship creates jobs for South Carolinians by South Carolinians.”

But relying on small, in-state businesses for improving South Carolina’s economy meets with pushback from traditional economic developers for a good reason — South Carolina is comparatively poor with almost one in five people living in poverty.

Many small business jobs, they say, are low-wage, low-skilled and not upwardly mobile. They don’t allow families to build wealth, providing only enough money for them to hold on. Adding more home-grown jobs in already poor communities is little more than moving existing money around in new ways.

Outside investment, according to traditional developers, is vital because it infuses not only more money, but higher-skilled jobs into local economies, which helps communities diversify economically.

“Having these value-added jobs are the only way you can really increase the wealth of a community,” said one long-time industrial recruiter. “You have to bring in outside capital and outside jobs to be successful in improving the general welfare.”

Every year, Statehouse Report urge state legislators to adopt a policy framework to take a more strategic approach toward dealing with policy issues. One recurring job creation component calls for “a Cabinet-level post by 2020 to add and retain 10,000 small business jobs per year. Politicians talk about helping small businesses. This would force them to.”

Any divide on how states grow new jobs shouldn’t really exist. South Carolina needs to do everything they can — from traditional economic development to attract outside investment from the BMWs, Volvos and Boeings of the world to intensive community development that focuses on nurturing home-grown jobs by investing in building the capacity of people who live here already.

We should be able to chew gum and walk at the same time with economic development. Palmetto policymakers need to recognize that growing jobs is more than landing a whale of a company or approving more tax breaks. It’s better to have a combination of strategies that includes spending more money in local communities to boost skill levels and provide what small businesses really need to prosper.

Andy Brack is editor and publisher of Statehouse Report. He can be reached at brack@statehousereport.com.

http://www.statehousereport.com/2016/02/12/state-needs-better-balance-on-economy/