By: Amy Holloway, President, Avalanche Consulting
Our last two articles explored two interrelated trends impacting the country’s economic vitality – the growing wage divide and decreasing affordability of housing. We discovered startling statistics that illuminate these challenges:
- While the top half of U.S. income earners saw their real wages grow 3% in the past 10 years, the bottom half saw real wages fall 4%. Income disparity is increasing.
- In the past decade, there has been a massive shift from home ownership to renting. 330,000 fewer households owned homes in 2014 than in 2005, and there are now 6.5 million more renters.
- The share of American households paying more than 30% of their income for housing is now 35%. It is worse for renters. 52% of renters spend more than 30% of their income on housing.
These issues have become a source of conversation within modern economic development organizations, especially in the past year. If an EDO’s objective is to help advance economic prosperity for everyone in its community, then it is the responsibility of an EDO to take action to help correct these unhealthy trends.
A traditional business recruitment approach to economic development won’t be enough. Sheer job creation will not adequately address wage disparity and affordability challenges. It could even exacerbate the issue. With a current 5% U.S. unemployment rate (and even lower in many metros), the drive for more jobs could lead to workforce shortages, potentially threatening existing businesses.
In light of these challenges, what is our advice for 2016?
EDOs must focus on job quality and the education pipeline.
Quality jobs have higher wages, income earning potential, and career advancement opportunities. They are found in companies that offer a complete range of jobs, from entry level to senior management, and clear pathways for workers to be promoted as their skills and experience improve. Quality jobs allow people to generate wealth and improve their standard of living.
Three things economic developers can do to emphasize the quality of jobs over quantity of jobs:
- Refine your target clusters to include businesses with high quality jobs. When identifying sectors and companies on which to expend your limited resources, make sure they will offer your residents with higher than average wages and potential to advance their careers.
- Re-evaluate your EDO’s performance metrics. Adopt metrics like higher wages, shrinking wage disparity, and job diversity as primary metrics rather than the quantity of jobs created. Lead a concerted effort to educate your stakeholders about why your metrics need to change in order to have a healthier economy.
- Re-examine your incentives offerings and reconsider how your community looks at economic impact. Incentives should reward primary businesses for paying higher wages across occupations even if the business is creating only a handful of those jobs. (This allows small local businesses and entrepreneurs to be eligible for incentives, too.) Think creatively. For example, tailor incentives for businesses employing a greater diversity of occupations or for those with clear career advancement programs for employees.
Companies with quality jobs are more likely to grow in regions with an aligned and complete education pipeline. An aligned pipeline is one in which education programs have anticipated and adapted to the needs of the region’s target clusters. A complete education pipeline offers entry points for workers of all skill levels and a seamless series of programs for workers seeking to advance their skills.
Aligning and completing the education pipeline requires a multi-institutional approach that involves K12, community colleges, universities, workforce agencies, and training providers. These institutions must commit to working together. They should set their sights on providing, as a whole, a complete set of programs that can move students from basic to advanced skillsets with limited redundancy among institutions.
Three things economic developers can do to align and complete the education pipeline:
- Initiate these conversations if they aren’t already happening in your community. Bring educators together to discuss what a complete and aligned pipeline would look like and how coordination will benefit their institutions.
- Bring local businesses into the conversation. Document their talent needs and those of your target clusters. Share this information with educators.
- Gather data through primary and secondary research to quantify current and projected skills gaps. Arm educators with this data to inform their decisions and help them advocate for changes in programming and funding.
Avalanche Consulting is devoted to helping communities reach new heights. We believe economic vitality can only be accomplished if everyone in a community has access to quality jobs and a complete education pipeline that prepares them for career advancement and a higher standard of living. As an economic developer, you have a critical role to play in this progress. We hope these six tips will inspire you and your team in 2016.