Abstract
While several inclusionary economic development policies may appear similar to traditional economic development policies, they are different in focusing on four key concerns. First, they are more focused on creating greater economic opportunities for minorities and people struggling in poverty. Second, they promote policies that positively impact the economic and social well-being of future generations. Third, they encourage environmental and social sustainable development. Finally, the author argues that they should also concentrate on improving workplace conditions for all employees.
The call for inclusionary economic development begs the question, “what was wrong with the traditional approach to economic development?” The follow-up question is, “how do inclusionary economic development strategies differ from previous strategies?” While many of the policies are very similar, I argue that key differences should be that inclusionary economic development policies consider the economic well-being of future generations and create employment opportunities as if employees mattered.
Most all local economic development programs target three activities: (1) retaining and assisting the expansion of existing base firms and industries; (2) attracting new base businesses; and (3) growing innovative businesses through entrepreneurship. In addition, economic development strategies are typically based on the strength of an area's existing economy, which includes its current economic structure (clusters), location (transportation), quality of life, and, of course, workforce. However, it is also clear that many local economic development organizations do not coordinate significantly with an area's workforce development efforts. Still, the primary focus of traditional economic development is job generation by any means necessary (Rubin, 1988). Typically, it is the number of jobs that is reported to the press; the quality of the jobs created and who gets these jobs are of secondary importance. Nevertheless, most traditional economic development efforts consistently focus on providing employment opportunities for unemployed and low-income residents.
Many who call for inclusionary economic development are focused on four major issues:
Traditional economic development policies have not created enough employment opportunities for people of color to advance. Most inclusionary economic development strategies call for diversity in both their design and implementation. In fairness, I have been involved in many economic development strategies over decades that have attempted to capture and incorporate the voiced concerns of minority neighborhoods. But the lack of success is reason enough to call for a new approach. Evidence suggests wage growth has stagnated and intergenerational income mobility has been declining in the United States (Davis & Mazumder, 2022). Moreover, this decline in mobility is not uniform across the nation (Chetty et al., 2014). Individuals living in southern states or in stagnating smaller communities, nationwide, face a tougher time getting ahead. In short, traditional economic development appears to have been ineffective in providing employment opportunities for low-wage, low-skilled workers living in struggling regions. The lack of economic and social mobility is a growing threat to the stability of regions. Evidence has suggested that the outlook of economic mobility for individuals born in the 1980s is far more difficult than for persons born in 1940 (Chetty et al., 2017). Moreover, productivity gains have not been shared, with the very top earners receiving the lion's share. In short, traditional economic development policies are associated with a period of stagnant wages and the lack of mobility. The current situation calls for new initiatives. Therefore, place-based economic development strategies are increasingly recommended (Bartik, 2022). Moreover, as Bartik warned, place-based economic development is more than just creating employment opportunities in blighted and high poverty areas. The jobs must be accessible to the residents and hold promise for advancement. This is a tough order to fill. A chicken processing plant, for example, provides demanding, accessible jobs but very limited opportunities for advancement. Nevertheless, a key component of inclusionary economic development is focused on creating jobs that are suitable to existing low-income residents and that can serve as springboards to further employment opportunities. The latter goal is the more challenging. The third component of inclusive economic development is grounded in the belief that future populations should matter in today's economic development decisions. For example, the stark difference between traditional and inclusionary economic development can be seen when thinking about the importance of child care. The employment barrier caused by a lack of child care is clearly understood across all economic development efforts. However, the push for quality child care is an inclusionary approach that calls for the economic success of the next generation to be considered in today's decision. The issue is more than simply finding a place where a working parent can drop off kids to get to work; it is the provision of a crucial start for the child's future development. The same is true for the many Promise scholarship programs across the nation. More traditional economic development approaches see scholarship programs solely as an amenity attraction tool, while inclusionary economic development advocates see it as including the economic success of future workers in the decision making of today. Similarly, inclusionary economic development advocates warn of the threat of climate change. Inclusive economic development is a call for sustainability. Current vulnerable populations living in low-lying coastal areas, such as the Ninth Ward in New Orleans or in depressed, fire-prone communities in the Pacific Northwest, are already feeling the severe impact of climate change.
An inclusive economic development approach must not only open the door to economic opportunities for existing, low-wage workers, but keep the door open for a future generation of workers.
Lousy Jobs and Declining Mobility are Leaving More People Behind
As the famous musician Ray Charles said more than 70 years ago: “Them that got is them that gets, and I will tell you I ain’t got nothing yet.” Too many jobs pay low wages and offer little daylight for advancement; for this and other reasons, economic mobility has declined. If most new employment opportunities in a metro area are taken by newcomers and if businesses are in hard-to-reach places, then it is very likely that certain populations—even entire metro areas—will continue to be left behind.
National occupational forecasts suggest that if current trends in demand and innovation continue there will be a dearth of good paying, middle-skilled jobs. A growing share will be good, high-paying jobs; too many will be low-wage jobs requiring low skills. But middle-skilled, good paying jobs outside of health care and construction trades will be in short supply. According to the U.S. Bureau of Labor Statistics’ latest occupational forecast (2022), 35% of the growth in jobs from 2021 to 2031 will be low-wage, low-skill jobs (less than 80% of 2021 median wage and requiring only a high school degree or less). Worse yet, many of these jobs will likely be part time and require nonregular hours. Many workers face low prospects for upward mobility within these occupations. In fact, career pathways are limited to only a small set of occupations, including health care and construction trades.
On the top end, 44% of the change in occupations during the coming 10-year period will be in high-skilled, well-paid positions (20% above median wage and requiring a bachelor's degree or higher).
Only 2% of job growth is forecasted to be in the middle-skill, middle-wage positions (high school plus experience or an associate degree, and within 20% of the 2021 median wage).
Additional worries are quickly added to the forecasts—many of these middle-wage, middle-skills jobs are population-based, meaning that their growth depends upon the growth of the community—not a promising proposition for cities or regions in decline. Second, research suggests for the past 50 years a growing percentage of jobs pay low wages, while the number of middle-wage jobs have declined due to industry restructuring. The blight of long-haul truckers is a disturbing example: 40 years ago, long-haul trucking offered good pay for difficult work—being away from home for days at a time and dangerous working conditions. Now, it offers modest pay for the same work challenges.
Several studies found that economic mobility—able to move out of the economic cohort of their parents—has fallen during the past 50 years (Chetty et al., 2017; Davis & Mazumder, 2022). In addition to the lack of mobility, evidence has suggested that 50% of low-wage workers are the primary wage earner of their household/family (Ross & Bateman, 2019). Only 30% are secondary earners, and another measure indicates that 30% of low-wage workers live in families struggling below 150% of the federal poverty line (Ross & Bateman, 2019).
The decline in middle-skill (noncollege), middle-paying jobs in urban areas is especially felt by people of color. According to Autor et al. (2020), the number of Whites holding these jobs declined by 6 to 8 percentage points relative to nonurban areas, but for Blacks and Hispanics the percentage-point decline was double—12 to 16 points. Worse, these declines are associated with a similar increase in the number of low-paying jobs (Autor et al., 2020). In short, good jobs are being replaced by bad jobs and Blacks and Hispanics are suffering the most.
There are Limits to What Cities Can Do
There are two major roadblocks stopping communities from successfully implementing an inclusive economic development strategy.
Middle-Skill, Middle-Paying Jobs Don’t Grow on Trees
First, it is not easy to attract or grow middle-skill employers. Cities cannot pick and choose and, indeed, most economists argue strategies targeting industries are seldom effective, and it is better to work on setting the environment for possible growth.
Many inclusive economic development policy analysts call for communities to support entrepreneurship, focus on retention and expansion of existing businesses, push for innovation, and have a talent development system. They are very similar to traditional strategies. Moreover, they encourage the preparation of asset maps and the identification of an area's more active clusters. The region's training institutions and community colleges are called upon to play a major role in bridging the gap between middle-skilled jobs and the skills of economically disadvantaged residents. While all these are sound recommendations, I fear that there are limits to what a local area can do to promote economic development. The stage can be set, but nothing can happen.
Today is More Important Than Tomorrow
A second challenge facing efforts to promote intergenerational, inclusive economic growth is that, in general, people have high discount rates—what is happening today means a lot more than what will happen tomorrow. This is clearly seen in the struggle to create opportunities for quality child care services. While the benefits of quality child care are well documented, the present need for someone to “watch the kids” overrules the need for quality. Shift work is particularly challenging as most quality child-care centers are open only during regular daytime hours.
There is, however, a big difference between quality pre-K child care and just having someone watching your kids. The research is clear that high-quality preschool has a positive long-term impact on a student's adult outcomes, even if test scores in later years of school seem to be unaffected. The long-term impacts are seen in educational achievement, work earnings, and criminal records. Bartik (2014) found that $1 invested in quality preschool generates a $2 to $3 increase in earnings of individuals who do not move out of the state. Other researchers found the social benefit of $1 spent on quality preschool to be between $8 and $16 in return because of reduction in crime and social assistance given each dollar spent on quality preschool (Rolnick & Grunewald, 2003). Finally, an analysis of universal public child care, especially if it is means-tested, has the potential of increasing the nation's gross domestic product by 0.2% to 0.3% over a 10-year period (Penn Wharton, 2021).
For low-income families, quality pre-K programs can boost lifelong earnings of a child by 10%; for middle-income families, it is a 5% gain (Bartik, 2014). Unfortunately, these gains do not address the short-term needs of the community. In short, the provision of quality pre-K child care would be sound federal policy, but for local communities it requires more patience and long-term thinking than most stakeholders in the economic development community have.
In fact, the existing employment structure—shift work, part time, and irregular hours—is a major barrier to finding quality preschool and is one of the reasons why employment needs to be re-examined as if employees and their children matter.
Evidence shows that Promise scholarship programs improve the economic prospects of children as well. The growth in the use of Promise scholarship programs is geared toward improving the economic trajectory of students struggling in poverty. Evidence shows that scholarship students perform marginally better in high school and have higher completion rates in college. Still, some may question if enough of these successful students stay in the area for the community to enjoy a net benefit, and these gains are simply too far into the future for many local economic developers to consider.
Inclusive Economic Development is Sustainable Economic Growth
While the focus of this commentary is on employment, it is important to remember that inclusionary economic development is strongly associated with sustainable economic development since future generations are to be included in the equation. While traditional economic development assumes that the market system will generate sufficient changes in prices and incentives for economic growth to stay sustainable, backers of inclusionary economic development do not necessarily agree.
In addition to promoting green energy technologies and regulating activities associated with global warming, many advocate that businesses should base their investments on the triple bottom line: social, environmental, and economic value (e.g., people, planet, and profit; Hammer & Pivo, 2017). Environmental justice is highly associated with inclusionary economic development: everyone should live in an environmentally safe neighborhood. There is no reason to believe that businesses do not care about sustainability, but business survivability overrules sustainability.
What Can Be Done? Employment as if Employees Matter
Most all inclusionary economic development strategies focus on creating accessible jobs to low-income individuals by enhancing skills and education opportunities and the generation of employment opportunities that provide reasonable economic pathways. While it is tempting for developers to vie for that next big development—electric vehicles, computer chip manufacturing, distribution centers or alternative energy development—inclusive economic development strategies are more focused on creating middle-skilled jobs, regardless of the industry.
Traditional economic developers will point to the fact that the market generates employment opportunities for an area's low-wage workers through (1) the multiplier effect—the generation of jobs in consumer services and business services that are supported by the income created through the landing of new base jobs; and (2) the creation of job chains that can open new positions for low-wage workers. Job chains occur when a better, new job is filled by an existing area worker, opening a new employment opportunity for a less-skilled area worker.
Inclusionary economic development advocates question if we can simply grow ourselves out of the current state of economic immobility. Metro areas that have attracted high tech or advanced economic activities also generate employment opportunities for low-skilled workers in food services, hospitality, and retail/consumer spending sectors. However, this employment growth comes with its own set of challenges, as the area's rising cost of living can severely reduce affordability, especially housing affordability, for low-income residents.
In addition, some question if traditional approaches to economic development generate job chains long enough to reach down to un- and underemployed individuals. If the new job is filled by a person moving into the area because of its job skills requirements, the job chain is severed and employment conditions for the area's low-wage, lower-skilled workers remain stagnant.
Employment as if Employees Matter
Customized worker training programs, job search assistance, and manufacturing assistance services have all been proven to be effective in expanding employment opportunities for low-income or marginally employed workers. Still, there are clear market failures in local labor markets that harm the ability of low-wage workers to find good or, at least, better jobs and to advance.
First, it can be difficult to find stable, full-time employment; often workers must line up multiple part-time positions. Second, due to the part-time nature and unstable scheduling of many jobs, low-wage workers tend to churn through jobs at higher rates than do higher wage workers who have more stable conditions. High turnover is as much a workplace problem as it is a workforce problem. Low-wage workers do switch jobs regularly (churn); however, it is typically to other jobs that, unfortunately, offer similar wages and the same limited career opportunities. Low-wage workers who switch jobs have a greater than 50% chance of getting roughly the same wage for their efforts, if not lower wages (Escobari et al., 2019). In addition, unstable employment conditions can lead to periods of unemployment that trigger financial instability (Fuller, 2008). Workers who earn lower wages tend to stay unemployed for a longer time following a job loss. Finally, many full-time workers may be missing real opportunities for employment advancement because they do not monitor job openings.
Low-wage workers face other barriers. First, they may have limited social networks due, in part, to language barriers that may limit information flows about job opportunities, as well as available training programs. Second, being employed in jobs that do not have flexible hours, require irregular hours, or are outside of the 9-to-5 schedule adds another responsibility to an already difficult life of juggling children, housing, transportation, and everyday hassles on a very tight budget. An unexpected disruption in child care, transportation, housing, or a host of possible emergencies could cause a person to lose their job(s).
At the same time, employers pay a price for the constant churn in its workforce: onboarding costs, training, costs associated with a lack of team stability, and disruption in the workflow. Nevertheless, many employers have established highly efficient human resource systems that minimize the cost of turnover for low-skill jobs. The key issue is to avoid a “low-skill equilibrium” where low-wage workers continue to churn through low-wage jobs because they do not have the time and energy to build skills, while employers develop highly effective employment processing systems to cope with high turnover rates.
Good Employers Can Be Successful
Sooner or later there will be a hand off between public workforce initiatives that create “job-ready workers” and the private sector that provides employment opportunities. The effectiveness of that hand off is a major question for inclusionary economic development. It is the employer that creates either good jobs or bad jobs, and the nature of a job plays a substantial role in turnover and workers’ ability to succeed.
Good employers can pay good wages and remain competitive. It is reported that Costco and Trader Joes, for example, pay their workers substantially more and offer better benefits and training than their competitors, yet they remain industry leaders. In fact, one study found that for every $1 increase in payroll, monthly retail sales can increase by as much as $28 and, at least, by $4 (Fisher et al., 2006).
Companies that can eliminate unpredictable schedules, short hours, and mundane routine jobs will reduce turnover. In short, companies can do good and be successful, but it may require a redesign of current employment practices.
What should communities do about average or even “bad” employers? In asking that question, I am suggesting that the boundaries of standard economic and workforce development policies be pushed and infringe on the territory of human resource management (HRM). Better HRM practices could make substantial gains for low-skilled workers (Ton, 2014).
A recognized public role is the provision of data and information of which existing employers may not be aware, including the area's employment situation and market wage rates. This could be expanded to include studies showing the possible financial gains should businesses reskill their low-skilled workers and redesign their workplaces. Some researchers call for an inclusive “lifelong learning infrastructure” that enables workers to break the seemingly never-ending cycle of bad jobs (Hund-Mejean & Escobari, 2020).
Second, the public sector could sponsor seminars that offer ideas for employers to create a more stable work environment for its low-wage workers. In addition, employers could benefit from walking the difficult line between offering flexible hours that match the needs of both workers and customers, balancing customer peak hours and the family responsibilities of their workers. When employers and workers battle about unpredictable and unstable work schedules and involuntary part-time work, it can result in poor customer service and high turnover rates.
A third step could be to revitalize existing or create new social networks between employers where information can be shared. In these associations, innovative work practices and their estimated impacts can be shared between noncompeting business leaders. There is some evidence to suggest that these activities can be effective conduits in sharing better work practices and training programs (Erickson & Jacoby, 2002). The challenge is to keep the network active and not cluttered with unproductive events or crowded by employment consultants.
A Shout Out for Employer Resource Networks
Employee turnover is costly, and many employers want to play a positive role in their communities. Employment resource networks (ERNs) are employer associations that pool resources to provide key support services for their entry-level workers to be successful in maintaining their employment. The participating employers see a reduction in their turnover rates and a more stable workforce; workers receive vital support services that enable them to stay employed and advance in their careers.
Many ERNs have a job coach or a social worker on site to assist workers in arranging child care, transportation, English as a second language programs, and general employment counseling. The task of the job coach is also to provide employability or soft skills training to entry-level workers. Job coaches are in place to help low-wage workers advance by working to address their basic needs (Fuller & Raman, 2022). Job coaches can be extremely effective in encouraging workers to be successful; however, being a successful job coach takes a unique set of skills that are not easily found.
In addition, a good ERN should attempt to build self-efficacy in its participating employees and encourage the development of soft skills. ERNs should try to link participants with technical training opportunities and locate the financial resources to pay for it.
High Road Versus Low Road
In many ways, what I am suggesting can be boiled down to the old high road versus the low road debate of employment management. High road advocates argue that good wages and working conditions create a more productive and stable workforce that will generate equal or greater returns than little (or no) training, irregular hours based solely on the needs of the business, and the high turnover of low-skilled workers (Osterman, 2018). However, if the high road, as advocated effectively by Ton (2014), generates greater revenues, why are not more firms taking it?
Harvard's and MIT's business schools argue that investing in workers and creating a friendly worker environment can enable businesses to do well while doing good (Rodrik & Sabel, 2019). Good work design, that enables entry-level workers to be more productive and more loyal to the firm, allows firms to pay better wages and be more profitable.
We know how a bad job can be made a good job:
Pay more and offer better benefits. Redesign work schedules to provide greater consistency and predictability of hours. Maintain strong safety standards and take employee complaints seriously. Encourage and recognize frontline staff who suggest improvements that increase production efficiency and customer satisfaction. Sponsor an emergency loan fund to cover small unforeseen employee expenses such as car repair and housing maintenance issues. Train and compensate supervisors on creating a productive and friendly work environment.
Of course, more can be added to the list.
Creating good jobs that are accessible to low-skilled, low-income workers makes sense for the nation, but it remains uncertain if it is good for an individual firm. Breaking employment practices that accept high turnover rates, offer minimum benefits, and unstable or inflexible hours may only be possible by offering positive or negative incentives through tax abatements, public contracts, or subsidized wage and training programs.
Concluding Comments
In addition to ensuring that future generations—including today's children—face better outcomes and that future growth is environmentally sustainable, inclusionary economic development also aims to create good jobs for low-income individuals regardless of race or geographic location. I have argued that to achieve this aspect of an inclusionary economic development strategy, it is necessary to go beyond existing public–private partnerships and work to change the human resource practices of firms that offer employment opportunities to low-skilled workers.
As mentioned, the uncoupling of productivity growth from wage growth has caused wage growth to remain stagnant. If shared, productivity gains could improve the employment conditions of middle-skilled and low-skilled workers, who may be stuck in low-paying jobs with irregular schedules and few openings for advancement.
Indeed, only productivity gains can support wage gains. However, economic developers and workforce developers are not in the position to assure that productivity gains are shared; only managers and CEOs can make this decision. Hence, the economic well-being in a growing number of communities is determined by management's decision to take the high or low road to employment.
I am afraid that while the high road—high productivity and high wages—is doable, it is not as clear or even accepted in traditional business practices as is the low-wage strategy. Therefore, employment systems must be redesigned as if the employee mattered. Just paying higher wages will not, on its own, achieve a workplace environment of continuous improvement. Moreover, there is a role on all levels of government to push employers to consider the high road: federal funding for training programs at area community colleges, and state and local funding to organize and facilitate associations of businesses to present programs that document the benefits of employers taking the high road.
Economists focus on wage rates as the measure of good jobs. And it tops the list of what most workers want as well; however, there are other important conditions of employment that make up a good job. According to a recent Gallup poll of over 6,600 workers (Rothwell & Crabtree, 2019), the top 10 characteristics of job quality are:
level of pay stable and predictable pay stable and predictable hours control over hours and/or job location job security employee benefits career advancement opportunities enjoying the day-to-day work having a sense of purpose and dignity at work having the power to change things that are unsatisfying at work
Managers in some industries may have a tough time redesigning their workplaces so that employees can enjoy their day-to-day work. Nevertheless, it is very possible that employers in many industries can.
We are in the age of measurement and regional indicators. If the impact of economic and workforce policies can’t be measured, it is difficult to gain the necessary support for their continuation, no matter how good they sound. I have witnessed the death of many promising local anti-poverty and community workforce training programs because they didn’t develop measures or indicators that showed the positive results of their efforts. If an area's economic development effort is focused on creating employment conditions that support the advancement of low-wage employees, it would be in its interest to create indicators of internal employment conditions that show the current employment turnover and retention rates for area firms. Such an effort would require a trusted third- party to
develop a representative sample of a region firms that hire entry-level, low-wage workers, obtain the commitment of the firms’ CEO or owner, develop a data-gathering procedure—survey or regularly scheduled interviews, train the firm's HR department to complete a consistent data-entry form/process, generate a quarterly report for the community.
There are many barriers to such an effort. Many HR departments are understaffed, and a firm wedded to a low-road employment policy would have little incentive to participate. The requested data could be highly sensitive, and alternative employment practices, such as the use of temporary employment agencies or independent contractors, could make it very difficult to develop a consistent database.
Measurement is important if change is going to occur. Many years ago, I regularly drove by a manufacturing plant (now closed) that posted on a large sign in its parking lot the number of consecutive injury-free days of operations. I was disheartened to see how many times it returned to one. Still, I was impressed that it continued to post and update its status. If the move to an inclusionary economic development strategy means considering low-wage employees when creating employment opportunities, there must be a way to measure its achievements, even if they are disheartening.
Footnotes
Acknowledgements
A special thanks to Joyce Siler for her willingness to be my sounding board during the development of this commentary.
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.