New Trends in Economic Development Incentives
Economic development incentives are essential for thriving commercial, industrial, and residential areas to crystallize. Economic development incentives used by local and state governments in the United States amounts to tens of billions of dollars annually, to promote job creation, community investment, and industry growth.
For years, municipalities have focused on the two main factors of employment and investment when considering economic development incentives for projects. However, local governments are becoming increasingly interested in new economic development incentive strategies that will pull together the labor force necessary to attract and retain businesses from priority industries.
“Municipalities 10 years ago would be very excited to have an incoming company providing over 500 jobs,” said Amanda Rubadue, Vice President of Economic Development at Aspire. “Today, municipalities would be concerned about where they are going to find that many people.”
Data points such as salaries above the county average wage, benefits for the workforce including medical insurance, retirement, and tuition reimbursement, as well as employee training and upward mobility will all be taken into greater consideration as communities like Johnson County and southern Indianapolis seek out businesses from advanced industries.
An article from the Brookings Institution discusses the changing momentum and trends of America's advanced industries sector, which plays a vital role in supporting broad-based prosperity in the country. While output growth in the sector remains positive, it is limited by sluggish labor productivity, resulting in slow improvements in living standards.
Over half of the nation's employment growth since 2010 has been concentrated in lower-wage industries. The article emphasizes the need to build an advanced economy that benefits all by focusing on innovation, training, labor standards, and social safety nets. This also aligns with Aspire’s economic development strategic plan.
Aspire’s strategic plan includes attracting and developing 50% more jobs from advanced industries by 2025. The plan also includes driving innovation to boost business and industry development as its first of five goals.
The strategic plan heavily relies on creating a workforce that has ample access to educational resources and higher-paying career opportunities to sustain the labor needs of incoming businesses from high-tech sectors.
Among the characteristics that local economic development organizations like Aspire are looking for in companies to attract is their positions in the supply chain, ability to stay ahead of the technological race, as well as if they will saturate or diversify the existing industries in the region.
The Chicago Metropolitan Agency for Planning recommends reforming local development incentives in to achieve better local and regional goals. Research indicates that current tax incentives and development policies often fail to effectively generate jobs, improve main streets, and increase public revenues.
The guide introduces strategies to improve the use of incentives, focusing on principles of equity, transparency, performance-driven use, and pursuit of regional benefits to make the region more competitive and ensure lasting gains for businesses, developers, and communities.
“Communities are wise to include these factors when considering incentives for incoming projects,” said Rubadue. “Each community's priorities are different so they can create a rubric and add weight to particular factors to better tailor this process to their individual needs.”