Economic Development?

I no longer believe in economic development. There, I said it. Now, let me clarify. I believe the best business development strategy is being a great place to live, educate, and conduct business, as the Business Roundtable likes to say.

I’ve become pessimistic about conventional “tools” in the economic development tool box designed to entice businesses to locate or relocate here. Historically the location of most businesses is serendipitous, occurring because the owners chose to live here full or part-time for a wide range of reasons. I believe seductions such as tax incentives or green cards for foreigners are a race to the bottom.

In 2005, Toyota was locating a new auto assembly plant and chose Ontario over Southern states that offered hundreds of millions in tax abatements because Canada has a national health care system and a better skilled and educated workforce, not because Canada bought them with tax incentives.

Quality of life, a well-educated workforce, and strategic regulation will always trump tax incentives in location choices. And we already know Vermont has one of the lowest unemployment rates in the nation and a bevy of eager entrepreneurs. So here are four problems we need to address: underemployment, workforce education, start-up and mezzanine financing, and lack of an effective job-matching system.

There are three components that make a successful employment match and we have two of them. We know who’s available to work and we know who’s looking for workers. What we don’t know is how well the resume matches the job description and, more important, what might the candidate and employer collaborate on educationally to prepare the candidate for an open position.

As Tom Friedman pointed out recently in the Times, job qualifications are too general for the emerging reality of business. Requiring a college degree no longer ensures or even implies a good fit. I’ll go further and say that the term “college” is becoming meaningless. There are professional academies, vocational academies, liberal arts, and STEM institutions. A Harvard degree may be less important than knowing how to write code, write a letter, or manage people.

Imagine a job-matching system that analyzed both the skill synergy and the skill mismatch and suggested to the candidate what courses at what local institutions he or she needed to fulfill the specific job requirements.

As in so many areas, the old ways aren’t working. We have both candidates and jobs.  We just aren’t matching them correctly. Nor are we defining the skills gap well enough to help the candidate bridge it. Let’s reinvest economic development money in job-matching and higher education. Economic development is essentially marketing and marketing is more expensive than offering excellence.

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