Focusing On Job Growth And Attraction Will Ruin Your Community

Ed BurghardFocus on building the best possible community.  If you are great, people will notice and opportunities will appear.

paraphrased from Mark Cuban

 
Tweet: Check out these online courses for ED pros – http://ctt.ec/dydkH+

Okay, I admit that the title of this blog post is a bit of a stretch, but I wanted to get your attention.

The truth is, what has historically made you successful in economic development will conspire to cause you to fail going forward.  The world dynamics have changed and you need to change with them to help your community get on (or stay on) a path to sustainable economic prosperity.  I just finished reading Mark Lautman’s book – When The Baby Boomers Bail: A Community Economic Survival Guide, and interviewing him for a podcast.  Mark’s perspective is well worth paying attention to.

Mark makes a great case that demographics are having a profound impact on the way economic development really works and as a result, the profession needs a new business model.  Thanks to the aging baby boomer population the historical approach of focusing on job attraction and expansion is no longer going to serve your community well.  For the first time in our Nation’s history, there will be a shortage of skilled workers to backfill job vacancies created by retiring baby boomers.  The competition is shifting rapidly from attracting/creating job opportunities to becoming a community that can compete for skilled labor.  Companies are increasingly making site selection decisions based on a location’s ability to supply and attract the needed skilled labor.  Never before has it been more important for economic development professionals to collaborate with colleagues in community development, workforce development and education.

How Big Is The Baby Boomer Gap Problem?

I decided to surf the Internet to try and get a handle on just how big a challenge the economic development profession is actually facing.  Mark Lautman does a nice job summarizing it in his book.  But, I want to get a broad-based perspective.  Here are some soundbites that provide a look at the magnitude of the problem.

  • There are 77 million baby boomers in the workforce who will be retiring in unprecedented numbers.
  • US employers will need 30 million new college-educated workers by 2020. But, fewer than 23 million will graduate from college in the next 10-years.
  • By 2018, the US may have 4 million more jobs than workers to fill them.
  • When Boomers retire, they take with them institutional knowledge and skills. Rebuilding that knowledge and skill base can be time-consuming and expensive.
  • All else equal, fewer workers means less economic growth.
  • Companies are paying a tax on two fronts. They paid to hire and train employees, and now they will pay for the loss of experience and knowledge.
  • As aging baby boomers begin retiring, the effects on the overall economy and on certain occupations and industries will be substantial.
  • Professional occupations have a disproportionate number of older workers, particularly those requiring post-graduate degrees. The top 3 impacted occupations are airline pilots, management analysts and teachers.
  • By 2018, all but the youngest baby boomers will be of retirement age.
  • The Baby Boomer population could redefine our notions of later life stages by challenging expectations regarding part-time work, leisure, volunteerism, family roles and structures, and continuing education and skills development.
  • Many U.S. companies and nonprofits have not trained, prepared, or secured sufficient numbers of mid-level managers to fill the executive ranks nationally. A talent pool shortage among those with executive quality potential significantly affecst the level of competitiveness of U.S. industries and the quality of service from the national public and nonprofit institutions.
  • As boomers retire, expect wide-ranging effects: not only do retirees produce and contribute less in an economic sense, they tend to spend less as well — not a recipe for economic growth.
  • The problem won’t just be a lack of bodies. Skills, knowledge, experience, and relationships walk out the door every time somebody retires—and they take time and money to replace.
  • The mass migration of baby boomers into retirement will leave millions of open positions with only a fraction of qualified internal or external talent remaining with the capabilities to fulfill these roles.  Organizations that are lucky enough to fill these roles will probably overpay to do so while those who can’t (or provide inadequate replacements) run the risk of losing their competitive advantage in the marketplace.
  • As the Baby Boomers retire, immigration flows change, and the number of young people entering the labor force declines, the number of new jobs needed to maintain pre-recession employment norms will decline.
  • Every person who will be hired in the next 25 years has already been born.
  • In the US, the economic dependency ratio is increasing.
  • In 2050, there will be 1.5 people outside the work force for every 1 inside.

It is kind of mind blowing. Clearly the dynamic is shifting and companies need to get access to skilled labor simply to remain globally competitive let alone to support any expansion plans they may have.

Are CEOs And Their Boards Concerned About This Problem?

The short answer is yes.  Almost every CEO I speak with tells me they really don’t need the help of local economic development professionals to create jobs.  They need help in getting access to skilled labor to fill current and expected jobs openings created by retirements.

But, rather than rely on my straw poll let’s take a look at the findings from Area Development’s 28th Annual Survey of Corporate Executives.

“Historically, highway accessibility and labor costs have ranked as the top factors in our Corporate Survey respondents’ location decisions. However, this year, those factors were outranked by availability of skilled labor, which is considered “very important” or “important” by 95.1 percent of the respondents and is in 1st position. Manufacturers’ and other firms’ need for skilled labor is becoming increasingly pronounced and has been well documented. An aging worker demographic, along with a lack of interest in manufacturing careers among young people, has put the issue at the top of site selectors’ priorities. A new study from ThomasNet.com says this is “a ticking biological clock” for the manufacturing sector.  This is confirmed by the fact that more than 70 percent of the survey respondents say high unemployment rates are not making it easier for them to find the labor they need. More than 70 percent also say the unemployed are primarily lacking advanced skills, e.g., machine tool programming, advanced welding, etc.”

The fact that 95% of survey respondents now rate availability of skilled labor as the top priority suggests they are beginning to feel the pain and are now worried.  having been in the private sector myself, I can tell you there is nothing worse than investing the time/money to find a candidate with the right skills for a job opening only to have the candidate reject a job offer because he/she doesn’t want to live in the community.  It is really a double whammy because you know that candidate will end up in a competitive company operating in a community more aligned with his/her interests.

What Can You Do?

It is time to shift your focus to designing and deploying strategies that make your community a desirable place to retain and attract skilled labor.  Retain the baby boomers who want to work as consultants or part-time (Mark Lautman’s third bedroom concept).  Support their needs.  Find ways to make your community one where people want to reside.

I advocate shifting your focus from serving CEOs to viewing community residents as your client.  Understand how easy/hard your community makes it for residents to achieve their American Dream and make decisions to lower any barriers.  In short, become an American Dream Community.  If people can more easily achieve their American Dream by living in your community they will want to stay and/or move there.  Make it easy for those right employee candidates to say yes to a job offer from a company doing business in your community.  make it very difficult for people living in your community to decide to relocate elsewhere.

Does This Mean jobs Are Unimportant?

Of course not.  It simply means that as a profession the scope of work needs to broaden.  It means taking a more collaborative position with the other organizations in your community that contribute to the solution.  It means aligning and synergizing the efforts so that collectively your community wins.  It will mean EDOs need to develop stronger collaboration and strategic planning design/deployment skills.  But, this is not an impossible challenge.

CHECK OUT THIS NEW SERVICE

ED Training Image

Economic Development Professional Training

What do you think of this post?
  • Awesome (3)
  • Interesting (3)
  • Useful (3)
  • Boring (3)
  • Sucks (3)

13 Comments  |   Forward this to a friend Forward this to a friend   |   Number of emails sent: 541

Category Measures

Bookmark and Share

You can follow any responses to this entry through the RSS 2.0 feed.

13 Comments so far

  1. Mark Brbash

    August 10, 2014

    Ed.You’ve stated well the reason why this is an important transition in the US economy and how EDPros should respond.

    My only comments focus on this not being such an either/or situation. CEOs of existing companies are also community residents.

    Attraction still makes sense if it’s pursued in the context that “the best attraction strategy is the best R & E strategy” (to quote myself) in that there will continue to be growth based upon natural connections among suppliers and buyers. (Think the New Albany Beauty and Supplier Park)

    Of course, with that said, the availability of a skilled workforce will still rank high.

    Making connection with the community will require that EDOs also get engaged in needs such as the availability of affordable housing (so that workers have reasonable neighborhoods in which to live) and a quality education system (which I believe is still a major determinant of where people choose to live).

  2. Ed Burghard

    August 10, 2014

    Mark – I believe focusing on becoming an American Dream community is an “and” proposition. But, it does demand focusing on more than traditional job attraction, retention and attraction.

  3. Mark Lofthus

    August 11, 2014

    Ten years ago, economic developers – raised on tax increment financing, attraction strategies, and real estate deals – did not understand the critical role that workforce challenges face in our economic success. The “dot com” boom years should have at least taught that the challenges were coming, when unemployment fell to 3% in many places. Now, however, more economic development professionals do get it but they are still finding their way, when the tools of the trade they have been given continue to be financing, incentive programs, marketing ideas, and business recruitment strategies. Influencing this is the limited vision of many state legislative or local development bodies, who monitor their agency’s or staff’s performance in terms of older models of job number growth and businesses brought to the jurisdiction. I think that the most successful communities will be those who empower their development professionals to help realize workforce solutions, manage strong retention programs that are the basis of expansion, and land new opportunities that offer superior employment options to their residents.

  4. Jeffry Harris

    August 12, 2014

    I generally concur with Ed’s prognosis. Where my community’s initial approach to economic development originated from a consultant’s plug-and-play strategic plan (e.g., do abatements! Do TIF! Have a payroll-based grant!), we have pivoted to a nuanced approach best described as “buying community assets.”

    We don’t bludgeon a prospect with the array of incentives that every one of our neighbors possesses. Instead, we figure the prospect already wants to be here (or else we wound’t be having the conversation), and our job is to leverage that investment, payroll growth, etc. to enhance the larger community. So TIF’s are created – but the revenues don’t go to the developer – they go to the City’s capital budget for improvements in the larger area. Payroll-based grants are deployed – but they are directed to help buy-down the cost of creating new leaseable space.

    The issue I see in this analysis is with efficiently deploying workforce strategies. That actually appears to be a paradox. Because workforce is one of those areas of the economic development practice that we just don’t have a good handle on. There’s too many programs, from too many agencies. It’s far too easy to talk about workforce using platitudes (we ought to be better at training workers!) than it is to confidently help a prospect navigate WIA funding, community college programming, and local vocational school efforts.

  5. Neil Hensley

    August 12, 2014

    Ed, et. al., Do you have examples of organizations which have successfully made this transition?

  6. Ed Burghard

    August 12, 2014

    Neil – In his book, Mark calls out Grants, Rio Rancho, and Mesa del Sol (NM communities) as examples. He has since consulted with other communities and likely has a longer list. I have sent him an email to see if he might take the time to provide a more complete answer for you. Of course I am biased, but would suggest the list of American Dream cities is one to look at for examples. These cities have a broad and coordinated approach to economic development that is consistent with Mark’s guidance. Columbus, OH is an American Dream city. Hope this helps answer your question. My fingers are crossed that Mark will weigh in as well.

  7. Mark Remnant

    August 12, 2014

    some strong reflections of the situation here in regional Australia. significant issues showing up in relation to skills availability and those having the basic “employability” characteristics. With an aging farming population and the “learning warp” involved in operating machinery engaged in crop production, attracting skills remains critical.

    the close tie between community and economic development and the critical attraction factor of “liveability” certainly reinforce your comments around the need to understand community priorities and getting a clear sense of the importance of communities combining the acquisition of financial and social capital. While financial capital can survive for a while on limited social capital “in feed” it soon runs out of puff and the productivity gap widens as people move away.

  8. Mark Lautman

    August 13, 2014

    Niel, Ed etal – Three years ago Steve Howe, the EcD pro in Vermillion, South Dakota, realized that the community’s investment in growing the area’s economic base were being wasted if they couldn’t come up with a talent attraction program. Despite very competent recruitment and expansion program assets, strong state program support and great deal flow, everything died at the goal line from a lack of workforce housing. Today the community is in the process of adding two new operational wings to heir EDC operation; they have launched an in-house residential lot development operation that designs and develops new subdivisions and wholesales lots to production builders. Phase two involves standing up a local intelligence unit to collect and analyze data on the push pull factors driving decisions of qualified workers being offered jobs in the area and the motives and inclinations of existing workers thinking of leaving.

  9. Edward

    August 13, 2014

    Mark Lautman – Thanks for taking the time to chime in with a real world example that offers lessons on the key role of having access to a skilled labor pool. I encourage everybody to read your book and visit you website. The information is eye-opening.

  10. Baby Boomer Retirement

    August 25, 2014

    […] recommendation is to focus on enabling residents of your community to achieve their American Dream.  By reducing the barriers, your community will be attractive to retaining residents and […]

  11. Karen Schultz

    September 2, 2014

    This subject matter causes a rush of questions to raise awareness on many levels. Thank you for this publication. Did anyone mention the graduate’s skill sets will not match job descriptions required? How do you think job descriptions should be reworded to enable employers to attract the true talent they are seeking? How difficult will HR legislation and laws make hiring in the future based on the precedent of past issues of hiring and firing? What do applicants need to do differently in the future since it will be their opportunity to apply their strengths and do what they love to do instead of finding a job AND what will they have to remember about employers ability to be profitable to retain sustainable job opportunities for more people? Will we have to settle for a lower wage to remain employed and globally competitive? Will we need to understand more about the cost of employees to employers? Will it lower our health costs and create a happier, healthier workforce if WE indeed do find a job we absolutely love Monday’s about? Will corporations need to take a flatter more responsive construction of their hierarchal models to be more competitive? IS there room for revamping US business models all together to remain more competitive and meet the requirements of lower employee populations? Will corporations pick their locations and stay there longer term because of the shortage of people and the level of investment in training they will need to make? Will educators focus on business needs and businesses focus on supporting education programs? I think we all have to re evaluate our positions and what we contribute to US employment opportunities. Do you feel the level of immigration allowed currently is because of some of these issues and our ability to continue an economic stronghold in manufacturing?…let alone other positions that will be created? Sorry for the list of questions but I think these are concerns to be adressed today, right now as retirees are to be closing manufacturing sites due to their foresight in succession planning for their next generation of owners and skill sets required….sometimes due to the inability to both keep work flowing and have any money left to invest in their people or plant upgrades due to the inability to balance US corporations outsourcing sustainability in the USA. This is an area US unions failed to understand as well and made it very difficult to maintain their income with the long term outcome for their members. If unions became strictly the training business for employers minus the membership and lobbying, they would be of great service to the US economy but I think greed of unions and lack of hierarchal flattening of corporations and eradication of incentive programs that drive short term objectives are all issues to be solved rather sooner than later.

  12. Ed Burghard

    September 2, 2014

    Karen – Great list of questions. I’ll try and get Mark to comment. Here are my thoughts for what they are worth.

    To your point on skill gap, a core problem is the lack of a common lexicon between business and academia. Business talks in terms of titles and academia talks in terms of fields of study. Neither speak the language of skills. I was on a team that tried to address this in Ohio, and it was surprisingly difficult. We didn’t succeed, but I think it continues to be a worthwhile exercise and I hope somebody does succeed. Once both groups speak the same language it will be much easier to align supply and demand.

    With respect to the work “contract” between employee and employer, my personal belief is a new model will need to emerge. Rising ongoing costs (e.g. health care) will force companies to get work done through a more decentralized model. I would envision project based contracts to become more common and individuals will establish LLCs and be responsible for their cost of health care as well as retirement. These costs will be built into their fees as they are now for consultants.

    IMHO immigration is not impacted to the degree it should by the impending skilled labor crisis. For example, I think we could and should do more to make it easier for foreign nationals educated in our schools to become citizens if they wish. I also think we could figure out a way to make it easier for entrepreneurs to immigrate.

    The role of Unions is certainly undergoing a change. They will need to reinvent themselves to remain a service to members. For example, if the employment model changes to a decentralized sub-contract approach, Unions could play an important role in providing purchasing power to secure services at the lowest possible cost. To your point, they could also be a delivery vehicle for on-going training and mentorship of members. This is going to require Union leadership to innovate around their mission.

    Keep your fingers crossed that Mark will weigh in. I think he will like your questions. Thank you for asking them. And, hopefully other readers will chime in as well.

  13. […] this conversation is destined to be discussed ad nauseum. I advocate that the purpose is to better enable residents to achieve their American Dream. It is the singular mission that all organizations within a community can rally around and it puts […]

13 Responses to “Focusing On Job Growth And Attraction Will Ruin Your Community”




XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

By submitting a comment here you grant Strengthening Brand America a perpetual license to reproduce your words and name/web site in attribution. Inappropriate comments will be removed at admin's discretion.

SBA Blog