GJEP News GJEP News features news about economic development issues, GJEP activity updates, profiles of GJEP Investors, and upcoming event invitations.... more
|
 |
 |
| Home > GJEP > Economic
Development 101 |
|
Economic Development 101
|
Economic Development means different things to different people.
This section of our website aims to answer some of the questions
often asked about economic development.
What is economic development?
Economic Development usually takes three forms:
• Business attraction
• Business retention and expansion
• Business creation
In Mesa County/Grand Junction area, business attraction and business
expansion and retention activities are carried out by the Grand
Junction Economic Partnership. The Grand
Junction Area Chamber of Commerce focuses on business networking,
political advocacy and many education activites. The Western
Colorado Business Development Corp. otherwise know as the ‘incubator’ takes
care of business creation or start-ups. All though these three
organizations are responsible for separate programs it's worth
noting they all work closely together on strengthening the area
economy.
|
|
All
three forms of economic development aim to create new primary jobs
that pay more than the prevailing wage, increase the amount of income
coming into the community from outside its market area, and create
greater capital investment in the community. The strategy is to achieve
this in a number of diversified industries.
Why do we do economic development?
Economic development has three main purposes:
• To give a greater number of people greater access to wealth through personal
economic growth
• To increase the tax base of communities in order to provide higher quality
public services to citizens
• To diversify the economic base and thereby cushion the community against
economic shocks
What are primary jobs?
"Primary" or, as they are sometimes called, "export income" jobs
are defined as jobs which produce goods and services in excess of what can be
consumed in the local marketplace. For example, the Grand Junction metro area
produces more polymers (or plastics) and electronics than can be "consumed" by
area residents. The polymers and electronics are "exported" to another
market, such as Los Angeles, and money is returned to Grand Junction for the
products. This is what creates the flow of new wealth into the community. An
example of a business sector which does not create export income is the retail
sector. This is because the shopping centers located within an area are typically
spending money that has already been "created" by primary employers
in that area. It is not "new money." However, the City of Grand Junction
would define the Mesa Mall as a primary income generator, because some of its
income will be generated outside the city’s boundaries. The local Stop-N-Save
is not a primary employer in the city, but if the market is defined as the local
neighborhood where the Stop-N-Save is located, then it becomes the neighborhood’s
primary employer. In other words, the definition of "primary or export income" employment
changes depending on your definition of the market.
What are the indirect impacts of new job
creation?
As a result of creating new jobs, the demand for goods and services generated
by the primary employer is increased and "indirect" or "spin-off" jobs
are created. These jobs do not create wealth. They are the product of "wealth" created
by primary employment. Generally, they are jobs like retailing, lawyers, doctors,
government workers, non-profit employment, etc. These occupations provide services
to primary jobs. They may also include jobs that meet the required "input" needs
of primary jobs.
What is a multiplier?
Spin-off or indirect jobs are typically associated with the term "multiplier." The
term "multiplier" comes from a series of economic calculations that
estimates the number of jobs required to meet the needs of one primary job. The
larger the multiplier, the greater the economic impact of the primary job. Two
things determine the size of the multiplier: average wage paid to the primary
employee and the amount and cost of "inputs" required for the primary
employee to accomplish his or her work.
A "typical" multiplier in the Grand Valley is in the 3.0 to 7.0 range.
Translated, this means that the primary job needs between 3 and 7 indirect or
spin-off jobs to accomplish his work and to meet his living needs. Retail employment,
because of its low wages and limited "primary income generating capacity" will
have multipliers in the .3 to .6 range. Therefore, retail is not generally considered
a good investment of the time of an economic development professional. Retail
is seldom a good primary employer, in terms of wealth creation, because of the
old adage, "retail follows rooftops." In other words, retail must follow
customers and those customers are created through primary employment’s wealth
generating ability.
A mature regional economy that offers a wide array of goods and services for
purchase by the primary job will also have a larger multiplier than a smaller
market. In other words, a diverse economy "holds on" to the primary
worker’s income longer. In an immature market the dollar exits more quickly,
thereby reducing the multiplier lacking many of the goods and services demanded
by the primary job.
How do we attract new businesses?
Attraction activities, performed in Mesa County by the Grand Junction Economic
Partnership, usually start with an analysis of targeted industries or "clusters".
This process analyzes the growing industrial segments of the national economy
and compares these growth sectors with the local community’s industrial
base. It examines why these sectors are growing or not growing in the local community.
It determines reasons why some segments are not suited for the local economy
(too distant from markets, workforce shortages, too smelly, etc.) and what gaps
might be filled to make the local community more desirable to these companies.
It looks at companies that are a "good fit" for the community and that
can diversify the local economic base.
Business attraction programs then develop an advertising and marketing effort,
usually a combination of the following:
• Website development
• Print advertising
• Recruitment trips
• Media or CD production
• Economic briefings
• Site selection conference attendance
• Trade show attendance
• Public and media relations
Some marketing methods are more effective than others. The combination used also
depends upon the available budget. The marketing program aims to generate interest
from companies in relocating to the community. The economic development organization
then needs to be well positioned to provide information and assistance to those
companies. Visit the Grand Junction Economic
Partnership page for a list of services we provide.
Why do companies choose one location over
another?
There are a multitude of reasons ranging from reducing operating costs, gaining
better access to skilled labor, establishing a presence in a particular time
zone, diversifying risk, or the owner may want to enjoy a better quality of life.
Every industry, company and corporate executive is different. It is the role
of an economic developer to understand a company’s needs and to portray
the area in a positive light. This is most effectively done by providing detailed
and accurate data about the community including comparisons to competing areas.
Sometimes the information speaks for itself and the company has an easy decision
to make. Other times the data may be similar between areas and incentives may
come in to play.
According to the Area Development magazine’s Corporate Survey 2001 of corporate
decision makers, the top 10 site selection criteria are:
1. Availability of skilled labor
2. Labor costs
3. Highway accessibility
4. Energy availability and costs
5. Availability of telecommunications services
6. Tax exemptions
7. Occupancy or construction costs
8. State and local incentives
9. Proximity to major markets
10. Availability of land
Remember… a community is not judged by where it is today. It is judged by
where the community is going. In the 1980’s, Denver was not on any company’s
Top Five list for relocation. As the region began to make important infrastructure
investments, such as Denver International Airport and the Convention Center,
companies began to notice. The region moved from #25 as the most desirable location
for office and manufacturing in 1987 to #2 and #3 respectively by 1991. DIA was
not completed until 1992. It was the community’s forward momentum that drove
international interest, not the position it found itself in 1987.
The Grand Junction area is in an excellent position to attract qualified primary
employers. Through its strong leadership, trained workforce, superior quality
of life, and most importantly, its strong vision, the Grand Junction area is
and will continue to be an excellent place to call home.
Existing Industry Retention and Expansion
Program
Over 80% of all jobs created in a local economy come from existing industry.
Any good economic development program has a retention program. In Grand Junction,
this area of economic development is managed by the Grand Junction Chamber of
Commerce.
For an existing industry retention and expansion program to accomplish its goals,
it must have two components:
1. A strategic element that focuses on public infrastructure improvements.
Communities with good capital investment programs, attentive training institutions,
moderate tax and regulatory environments and affordable housing are always desirable
locations. These elements can be achieved with a strong vision from elected officials,
government employees and the private sector working jointly. The same things
that attract new employers will keep existing firms.
2. Value-added services which are meaningful to the local company.
This requires direct assistance from the local economic development organization.
Providing such things as regulatory and training assistance, new business leads,
competitor analysis, technology advances, marketing assistance, and so on, provide
a needed "value added" service to local employers. A full understanding
of "who" are primary employers, their strategic directions and the
components of their success should dictate the types of services provided.
Business Creation/Start-ups
Many good ideas for business come from within the community. Mesa County is fortunate
to have a Small Business Incubator program, run by the Western Colorado Business
Development Corporation. The Incubator is designed to aid those companies trying
to get their business idea off the ground and to the market. They assist companies
develop a business plan, find financing, offer educational training, and one-on-one
business counseling.
Special thanks to Tom Clark, of the
Denver Metro Economic Development Corp., for writing this piece
originally,
and allowing GJEP’s adaptation and use. |
|
