Education, Labor Costs Play Role in Bringing in Jobs

E-Newsletter Special Edition/April 7, 2011

By Gene Strong

The debate regarding the use of incentives to attract businesses to a state and the effectiveness of those incentives has gone on for decades. Most all states and communities have used some form of incentive to attract jobs and investment from private sector employers. While many states have shifted to performance-based programs since the late 1980s, others have used cash grants to attract certain types of investment.

Many believe these projects would have happened regardless of the incentive, while others believe the incentive was the driving force behind the location decision. Actually I believe both are wrong.

Most economic development professionals and site consultants realize there are more strategic issues such as labor costs, transportation access, education and workforce training, corporate and individual taxation, and other areas that are more influential on a site decision than the incentive itself. All things being somewhat equal in various states and communities, however, the incentive will play a role in the final selection.

With more than 90 percent of U.S. states facing budget shortfalls in 2011, the question now becomes this: How do you remain competitive with other states and other countries for the best jobs and investment going forward? The traditional programs used for the last 25 years are unlikely to be affordable for governments. And given the current economic condition of many businesses in the private sector, it will be increasingly difficult to monetize these types of programs.

Gene Strong is a partner and co-founder of McCarty-Strong Global, LLC., a business development and consulting firm based in Lexington, Ky. Prior to co-founding the business, Strong served as secretary of the Kentucky Cabinet for Economic Development for nearly 14 years.


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