The Impact of Technology on Economic Development Policy
In a world where technology is enabling almost everything, economic development policy makers are faced with several challenges when planning and implementing strategies for economic growth. Communities, regions and states must be able to adapt programs and initiatives to address the economic disruption caused by technology. In particular, investments in technology and talent are vital to ensuring economic growth and wealth creation for residents and businesses throughout the world.
History is always instructive when looking at public policy impacting economic development issues. The United States and world have experienced evolution in the economy for centuries. The introduction of steam power and electricity were game changers for the economy. Transcontinental railroads and interstate highway systems allowed businesses to reach more markets with its goods. The oil and gas sector created wealth and allowed businesses and consumers to enjoy affordable and diverse energy sources.
Today, we sit squarely in the information technology economy and this is transforming the globe in dynamic ways. From the Internet of Things to automation, consumers and businesses alike are seeing more rapid disruption than any other time in our history. This requires public policy makers to be nimble in order to react and maximize economic opportunities and results. Thought leaders must focus on the best ways to prepare talent, position its tax climate, change regulations and align incentives to be best positioned for economic development opportunities.
In a technology enabled world, talent is the most important commodity. In fact, talent will not only be the most important location decision factor for a technology business, but it also represents the area where those businesses will invest the most money in order to ensure success. In our site selection practice for approximately 90 percent of our projects, talent is the highest weighted location decision driver by our clients. Due to this fact, governmental and economic development leaders have to adjust public policy to support the development of talent.
Today, towns, cities and counties need to examine the best ways to support the retention and attraction of talent. Investments in quality of place assets, job training (industry recognized credentials and certifications), telecommunications infrastructure and entrepreneurial development programs are critical. These types of investments position areas to attract a highly educated and sustainable workforce that meets the needs of its key business sectors.
When it comes to economic development incentive programs, technology disruption has had a significant impact on long standing tools used by local and state government. As an example, most local communities tie their incentive programs to capital investment as compared to headcount and earnings, because this is what has historically generated the most tax dollars for them. In addition, this is the way local leaders have approached economic development for decades.
As a result, it is important to pivot incentives to focus on human capital versus fixed assets (building and equipment) in order to competitive. This will require communities and states to examine their approach to taxation to ensure it meets the needs of a changing economic base. This way, incentives, forms of investment and generation of taxes are fully aligned.
In closing, communities, regions and states can no longer approach economic development in the same manner as it has for decades. By recognizing the importance of talent, technology and automation and most importantly, aligning initiatives and programs to support businesses, a location can position itself to provide more opportunities for jobs and wealth creation for its residents and businesses. The challenge is in front of us and the locations that seize the opportunity will be the economic winners.
Larry Gigerich is executive managing director of Ginovus.