My latest column is now online in the July issue Governing magazine. It talks about the various factors that drive company location decisions. There’s a tendency to adopt what I term a “single factor determinism” model of economic development (and other things). That is, people pick some X factor – say, talent – and use it as an all-powerful explanatory lens to understand the world. While many of these are important factors, actual reality is complex.
In my column I look at the move of fund manager Alliance-Bernstein from New York City to Nashville.
Economic growth, then, appears to spring from an amalgam of factors. Talent, wherever it can be found, really is of great importance. If you don’t have or can’t get the labor force to meet the demands of business, it’s going to be tough to grow your jobs base. And if other places have or can get the same talent — or perhaps easily convince your talent to move there — and have other advantages over you in terms of costs and business climate, then the talent you have may not save you.
There’s another troubling labor factor: Many places have shrinking labor forces, or will have them soon. This means it’s not very likely they will be able to grow their economies significantly no matter how favorable their tax climate. While it’s possible for them to become higher-value economies while shrinking in jobs, that’s not likely either. For some places, their struggles to attract people may be in part related to high taxes or onerous professional licensing and other regulations. In others, quality-of-life issues like crime may loom larger. Or perhaps problems like a bad brand in the market lag behind the reality of positive changes.
Click through to read the whole thing.