Resident Centered Economic Development

1e_lm46j76q-luis-llerenaGovernment of the people, by the people, for the people, shall not perish from the Earth.

Attributed to: Abraham Lincoln

In his Gettysburg address, President Lincoln stated succinctly the proper place for government in the lives of Americans.  He characterized our nation as a representative democracy that focused on the people.

Most economic development professionals today would agree focusing on improving the lives of residents living in the communities they serve is the end goal that matters most.  Investing in creation of desired assets to make life easier, improving infrastructure to help residents be more efficient, and advocating public policy reform/creation that helps make living safer and more affordable – are all ways to strengthen resident loyalty to the community and to help them achieve their dreams.  This kind of loyalty leads to community advocacy, retention of top talent graduating from local universities and colleges, and capital attraction/expansion from the private sector.

The problem is, even though they conceptually buy into this long-term resident focus, most economic development professionals have not embraced the practical implications.  Despite the rhetoric of of being for the people and wanting to serve the residents of their community, watching economic development professionals act over the years shines a glaring light on the truth: It’s all about year-over-year job creation.  Capital attraction/expansion trumps improving the lives of residents living in the community.  Or to be fair, is seen as the preferred way to accomplish the objective.  Unfortunately, focusing on job growth is a “For the Business” not “For the People” approach to economic development which can (and often does) become counter productive for current residents.

Focusing On Job Growth Can Result In Trading Off Long-Term Prosperity For Short-Term Gains

Consider the example of communities “fortunate” enough to be located in active shale plays.  These were typically small rural communities with infrastructure “right-sized” to the existing resident population.  Invention of horizontal hydraulic fracking made it possible to cost effectively extract natural gas from the shale under and around their communities.  As a consequence, economic development professionals in those communities were able to attract capital investment from energy companies.  These companies created a significant number of jobs associated with the exploration and drilling phase of shale gas production.  But, they also created a significant stress on both infrastructure and support services.  In many cases, this led to a rapid economic “boom” followed by an equally rapid and devastating  “bust”.

In a working paper authored by Susan Christopherson and Ned Rightor, the “boom-bust” cycle is described as follows:

“The extraction of non-renewable natural resources such as natural gas is typically characterized by a “boom-bust” cycle, in which a rapid increase in economic activity is followed by a rapid decrease. The rapid increase occurs when drilling crews and other gas-related businesses move into a region to extract the resource. During this period, population increases and there is a modest increase in jobs outside the extraction industry (Marchand, 2011) in construction, retail and services. When drilling ceases, either temporarily or permanently (because the commercially recoverable resource is depleted), there is an economic “bust”. Population and jobs depart the region (Feser and Sweeney, 1999).”

Economic development professionals serving those communities can certainly point to a short-term increase of jobs as evidence of “success”.  But, when you consider whether a community’s resident population benefited (improved standard of living, employment opportunities, sustainable economic diversification, etc.), the long-term impacts may suggest a very different picture.  For example, (according to the working paper) “the drilling phase of shale fas development usually depends on an out-of-state workforce, except for truck haulers and construction jobs.”  The increased population requires more services (police, fire safety, classroom space in schools, government services above existing budget), and a need for housing.  The community experiences increased traffic (stress on roads) and increased demand for goods which drive up local prices.  When the wells move into the production phase, there is a rapid decline in population and the community is left with on-going expenses stimulated by the shale energy industry without the tax revenue to pay for them.

By focusing on the narrow metric of year-over-year job growth as the standard of success, economic development professionals in these “boom-bust” communities have inadvertently created a situation where most residents end up worse off than before the industry invested.

This phenomenon is not unique to the shale energy industry. Consider the situation in Detroit MI, Cleveland OH, Buffalo NY, Youngstown OH, Wilkes-Barre PA, or St. Louis MO.  Each of these cities has experienced dramatic declines in population from their respective peak.  In each of these cities, the economic development focus was on year-over-year job growth. And, that narrow focus resulted in economic strategies that ultimately ended up being detrimental to residents.  Rather than concentrate on building sustainable success, elected officials and economic development professionals in these locations declared success when jobs were expanding and subsequently pointed fingers when jobs were lost.

Unfortunately, this kind of thinking continues today and makes reestablishing reliable economic vitality in these cities even harder.

Jobs Are Definitely Important, They Are Simply Not Sufficient

Nobody is going to argue having a robust private sector capable of providing residents good paying jobs is not important to the sustainable vitality of a community.  It definitely is.  The problem is as a success measure it is not sufficient (and it is potentially dangerous).

Suppose decision makers elected to put the well-being of residents as the litmus test for community strategic plans?  One of the first things that would be realized is most of the residents either already have a job (employed) or do not desire to have a job (retired or under age).  Take the Detroit MSA for example.  According to published data from the Bureau of Labor Statistics, in June 2015 the unemployment rate was 7.7%.  Of the 7.7%, only 30% are considered “highly employable” (based on the MWN employability index).  If you think about it, this translates to a cohort of only 2.3% of Detroit residents with the potential to directly benefit from attraction of incremental jobs.

Does it really make sense to evaluate economic development success based on the impact made for only 2.3% or residents?

Or, should the economic development professionals in Detroit be more focused on designing and deploying strategies to materially impact the remaining 97.69%?  Are their needs well understood?  Is incremental job growth really the best solution to help improve their lives?  Can government ever be “For the People” if it focuses on the needs of only only 2.3% of residents?

You can play these numbers out for your community and the conclusion will be the same.  In my opinion, by focusing on year-over-year job growth you create the proverbial “tail wagging the dog” scenario.  Strategically, this is simply not a sound approach to sustainable prosperity.

Resident Needs Are Far More Complex Than Simply Creating Jobs

Forward thinking economic development organizations are beginning to realize it is about Place Branding (which I define as Place Making + Place Marketing) rather than jobs.  They are acting more like Brand Managers and are increasingly concerned with what it is like for residents to make a life in their community.

One example is Los Angeles County.  The Department of Public Works is evaluating projects based on their sustainable impact (“the long-term health and wellbeing of residents in the community”).  The Agency uses a system called Envision to measure a project’s sustainability. Envision looks at the social, environmental as well as traditional economic impacts.  Other Agencies across the Nation (e.g. NYC’s Water Agency as well as Agencies in FL, IL, ME, MA and TX) are beginning to follow the Los Angeles County lead.

The IEDC has addressed the challenge differently than Los Angeles County.  The economic development professional association published a report entitled Economic Development and Smart Growth which recognizes the profession needs to focus on more that year-over-year job growth.  Here is an excerpt from the introduction …

“However, growth and development, if managed improperly, can negatively affect a community’s quality of life, leading to automobile congestion, pollution, pedestrian-hostile neighborhoods, and sprawl.”

The Report connects a community’s ability to attract and retain skilled labor with the perceived quality of life offered.  There are eight case studies shared in the Report to demonstrate the transformational power of this concept.

This realization is not unique to the U.S..  The OECD (a global organization for economic cooperation and development) has created a tool called the Better Life Index to help visualize the degree of wellbeing experienced in places.  This organization focuses on helping governments devise policies that will lead to better lives for citizens.  Jobs is only one of eleven criteria considered.  In case you are wondering, their study identifies civic engagement and work-life balance as two real opportunity areas for the United States.  If you are interested, the OECD website gives you an opportunity to compare U.S. performance versus other countries.

In The U.S., It Is About Achieving The American Dream

I believe it is time for the U.S. economic development profession to step away from a Jobs Based Model and adopt a Resident Centered Model.  This new approach puts emphasis on place making as well as place marketing.  It recognizes places need to offer the opportunity for residents to more easily achieve their American Dream.  The approach encourages design and deployment of strategies for asset creation, infrastructure investment and public policies/programs that enable residents to be more successful.  It is a holistic approach to sustainable economic development in which jobs is only a piece of the puzzle.

The success measure for communities is year-over-year improvement in the American Dream Composite Index (created by Xavier University).  The ADCI is a measure of the degree to which residents of a location believe they are achieving their American Dream.  For perspective, the XU model statistically defines the American Dream as thirty-five dimensions.  Comparisons can be made with other communities to determine which dimensions represent competitive advantage for a community and which present an opportunity for improvement.  Strategies to break down barriers to achieving the American Dream can then be created and included in community economic development plans.

Adopting a Resident Centered Economic Development Model holds both elected officials and economic development professionals accountable to the people.  It is the best way to ensure government consistently behaves in a way that is truly “of the people, by the people and for the people”.

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12 Comments so far

  1. Mark Barbash

    September 18, 2015

    Ed, I think that you’re exactly right on this approach. One of the challenges for economic development professionals is figuring out how this translates into their strategies and day-to-day activities. My sense is that, overall, it’s not as big a change as might be expected. There will be areas, such as the measuring and use of incentives, that could move significantly in another direction, but overall it’s more of a shift in focus and priorities. Good posting. Mark

  2. Ed Burghard

    September 18, 2015

    Mark – Thanks! Here is an interview I gave the Place Brand Observer about the new skills required of economic development professionals. Strategic planning, conflict resolution and cross-organizational leadership are key.

    http://placebrandobserver.com/interview-ed-burghard-strengthening-brand-america/

  3. Peter Nizette

    September 21, 2015

    Folks …excellent article, thank you. And no argument from me.

    It’s precisely the same in an LDC/SIDS context – and called ‘participatory planning’ – with a view to enabling buy-in from the locals/beneficiaries and, thus, arguably the strongest basis for sustainability of development (notice – I did not say ‘sustainability’ …it, thus far, is an undefinable concept) …

    …however …until and when ‘governments’ stop looking to ‘outcomes’ model of development (i.e. volume – exampled in the article by more jobs) …and focus mostly on IMPACT …the process of change will continue to bump along the bottom.

    In the international arena for example – donor agencies, such as USAID and others seem to believe that the surest sign of success is the year-on-year increase of attendance at workshops, training sessions and so on for example. Surely, 50 people attending a training session with 5 actually DOING something with the learning must be better than 500 – where no-one does anything! Not so – according to the ‘outcomes’ model.

    And THIS is where State, Regional and Local Governments must go – pragmatics of producing impact at local level, community pride, community cohesion and so on will, always, make for stronger Social, Economic and Environmental results …and actually ‘be’ the most sustainably underpinned strategy.

    Don’t need ‘fancy’ equations, btw …go, sit down with the people, hear them and ACT on, majority, needs – in the community, as a whole …beware, though, the squeaky wheel syndrome (the 2.3%ers) …

    atb

    Peter

  4. Ed Burghard

    September 21, 2015

    Peter – Thanks, and great insight. The profession is slowly beginning to shift in the direction you describe. I see a unique role for the ED community to take a lead n facilitating the process. As I said in the interview (see response to Mark) it will require the development of skills that have heretofore been important but not a priority. As the old song goes “The times, they are a’ changing.”

  5. Meghan Hunscher

    September 21, 2015

    Ed,

    Great blog post. This might be a good juncture to have a dialogue with the American Planning Association. The APA had an interesting article within the past year about participatory budgeting in which residents decided which “pot” of money to dedicate to specific projects similar to a crowdfunding model. Smartphone apps are also helping to determine efficiencies based on residents entering their preferences, needs, demands. The Atlantic Monthly recently revisited the issue of technology dislocating jobs, there we need to re-think the ideas about work and labor and how we generate wealth for future generations perhaps independent of the traditional “job.” It’s a serious discussion we need to start having now and across disciplines.

    Meghan

  6. Edward

    September 21, 2015

    Meghan – First, thanks 🙂 Second, I think you are exactly right. This is a dialogue we need to engage in now. The old model for success is going to be an albatross if we don’t reinvent how we do economic development. The new focus needs to be on residents and the game needs to move from being siloed to participatory. The connection between place making and place branding/selling is becoming more and more obvious. They are interdependent and should be viewed, planed for and supported as a system. The APA concept of participatory budgeting sounds like a big step in the right direction. It would be interesting to see the results of an exercise like that compared to the choices made by local politicians. I bet the two wouldn’t necessarily align.

  7. Mike Milkovich

    September 23, 2015

    I still don’t think you ED professionals “get it.” You still focus on college age and above for ED ideas and you don’t understand the feeder system, the high school curriculum.
    Kids have been graduating (or not) for the past 50 years with the idea that big business is greedy, rich guys are dishonest, America is an aggressor nation and entitlement for all. We had more entrepreneurial deaths that births last year for the first time in our history and no one understands why.
    “It’s the curriculum, stupid.” not the economy like Carville said.
    You need to change the attitude and thinking of our kids and the way to do that is create the kind of thinking you want. Understand freedom, the importance of education and self study, the importance of character and courage, giving back to the community, respect for those that came before, and each other, and belief in yourself and your abilities. You have to change a loser mentality to a winner mentality and economic development will take care of itself. If any of you ED professionals knew the first thing about coaching you’d understand the feeder system. Our feeder system is broke. It doesn’t teach kids to use their heads, it teaches them that “others will solve the problems.”
    The way to get out of this is create curriculum and put it into the schools. One way I found is to create local history as a one week class. It’s not about the history that’s important, it’s relating those who had local success to the kids of today. Every successful coach uses his/her local history to teach and motivate their kids to become great. I haven’t seen an economic development idea yet that does that. Until you guys start focusing on curriculum, you’re not going to change hardly anything. So you get a company to move from point A to point B. Big deal. One location got screwed while the other made out. You need to create kids who understand the foundation to economic development is “them” not someone else.
    Mike Milkovich
    localhistoryproductions.com

  8. Karen Schultz

    September 30, 2015

    As you may or may not remember, my focus will be to create the template based on an appreciative process that will focus on the American dream, hope, skills, interests, education, stories of strength for rural American towns. That development and research hopes to translate into a template easily used for any group to assemble a holistic view of what they offer one another and to others outside their community. I also hope it supports organizations and corporations. This template hopes to quickly summarize a town, area, region’s strengths they have to offer to form a corporation from grass roots or to attract a company who wants to grow or a corporation who sees the value of their area or town. I am glad to partner with others on this opportunity. I have been busy learning about rural areas, hoping to find an impoverished small rural town in NC. I have a few small towns who who are interested in the support of this approach. Love hearing others get this.

  9. Karen Schultz

    September 30, 2015

    Adjacencies of businesses who feed one another while also forming other needs is an important holistic outlook for towns to consider in their master plan. Just as we know schools grow full and then grow empty to grow full and then to empty. IF WE continue brick and mortar schools as we have now, additional buildings must be designed with multi use for businesses, medical or other business requirements for aging community which may have unique building code requirements. Be careful of the requirements you put in place and the wasted tax dollar building that becomes a burden on an older generation of residents. AND BTW I have a plan for abandoned shopping malls from the boom to bust areas as an opportunity that provides a win win to a community open for further discussions.

  10. […] How does your organization positively impact significantly more residents? First, change your paradigm from business centered economic development to resident centered economic development. Successful businesses in your community are a means to an end.  You need to work on better enabling residents of your community to achieve their American Dream. This objective has the potential to impact 100% of the residents in your community. I would strongly argue it is a much more motivational objective. But, it does require your organization to think differently and it requires you to acquire new skills. If your curiosity is peaked and you want to learn more about resident centered economic development, read this post I authored: It Is Time For A Resident Centered Economic Development Approach To Economic Development . […]

  11. Edward

    January 10, 2016

    Meghan – I think you are right. What I have found is the concept of better enabling residents to achieve their American Dream is actually a great unifying objective. Virtually everybody involved in economic development, community development, education or labor development can easily see their organizational mission supporting the objective.

  12. Edward

    January 10, 2016

    Mike – The Xavier University research into what the American Dream is very definitely includes making a quality education available. Consequently, the focus on better enabling the American Dream would naturally lead to tactical discussions around how you accomplish that objective with respect to the education dimension. Curriculum modification would be a reasonable discussion point.

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