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Larger Considerations

How much can a municipality do to promote its own growth? As stated, a municipality can do a considerable amount to make itself known to potential investors, it can (with the caveats noted) use subsidies, and it can do a certain amount in terms of sites and infrastructure. But there are also larger matters that are not within municipal control or that are only partly within municipal control. When firms are questioned about how they make location decisions, two items that come up very frequently are market access and the local labor market. Market access is primarily a matter of location, and that is beyond municipal control. Labor market considerations are a mixed bag. The size of the labor market, prevailing wages, and labor force quality all weigh heavily with potential employers. The last item is a mix of skills, education, and some intangibles like "work ethic."

Many municipal governments and development agencies cooperate closely with community colleges in order to match instruction with the needs of employers. This often includes an emphasis on STEM (Science, Technology, Engineering, and Math) education. The author has been told by a number of economic development professionals that firms often value this highly, perhaps because whether they will be able to hire and retain a satisfactory labor force is a prime anxiety for many relocating firms.

For many firms, quality-of-life questions weigh heavily in the location choice. This is partly because the executives and owners making the location decision care about where they will live and also partly because of recruitment considerations. If the recruitment of highly skilled personnel who are in high demand is critical to the success of the firm, then being located in an area that will be attractive to these potential employees is very important. What constitutes a good quality of life is a subjective matter, but items like climate, an attractive natural environment, recreational opportunities, cultural opportunities, the quality of public education, and personal safety are likely to be important to a very large number of people.

Some of the items listed in this section are entirely beyond the ability of a municipality to affect and some can be affected to some degree. To a large extent, the municipality and its economic development agency have to play the hand that they are dealt.

The importance of these larger questions also suggests that sometimes investments that are not directly aimed at economic development may have a bigger development payoff than investments that are directly targeted to economic development. For example, investment in a museum or concert hall, or in public parks, or in a system of bicycle paths by their contribution to the quality of life as perceived by potential employers may have a bigger payoff than, say, direct subsidies for investment in the municipality. Similarly, investment in public education may pay off in terms of both the perception of and the actuality of labor force quality. Two researchers studying employment in U.S. central cities concluded that the "only consistent correlate with long term economic success is the level of educational achievement of the workforce."10 This finding is broadly consistent with the view of the urban geographer Richard Florida that the most important determinant of a city's economic success in the long term is its ability to attract and retain members of what he refers to as the "creative class."

Of course, investing in education will not always have a guaranteed economic development payoff. For one thing, people do migrate. Many a small town has the unhappy experience of seeing some of its graduating high school seniors take their diplomas and head for more promising labor markets very shortly thereafter. Formulating an economic development strategy that makes the most efficient use of limited municipal funds is no easy task.

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