Wanted: New economic development job priorities

Job creation has historically been the prime objective of economic development programs.  By this standard we have done very well.
   New job creation in Whatcom County has replaced most of the jobs lost from contraction of the region’s primary employment sources such as timber, fisheries, mining, and agriculture.  Local labor markets are tight and unemployment is low by historical standards.
   Creating more jobs is an important goal for community economic development programs.
   Contrary to the myth that “Any job helps the economy,” recent research would indicate that an increase in low-paying jobs actually decreases the economy’s overall performance.
   The emphasis needs to be expanding the number of jobs that provide higher than the county’s average wage, and that include benefits, good working conditions, and job security.  It is important to target firms and industries that raise living standards of their workers and bring new wealth into the community.
   Economic-development programs need to emphasize increasing employment opportunities that raise the level of disposable income for local residents.
   Not too long ago, a very wise man said,  “Communities that import as much money as is drained from the local economy will have a stable economy.  Areas that can import more money will have economic growth.”
   This is very basic community economics.  Historically, in Whatcom County, resource-based industry, manufacturing, transportation, wholesaling, and mining were top industries that imported more money into a local economy than left the region.
   Services that we have come to depend on, like insurance, real estate, and governments, move money around within the economy, but don’t bring much money in.
   The draw on the system, sometimes called the “hole in the bucket,” is the retail, service, and construction businesses.  Much of the money made by these sources leaves the local economy and goes to out-of-state parent companies, suppliers, or manufacturers.
   If you are wondering if a business contributes to our local economy, “just follow the money.”  Where do the funds to meet payroll come from?  If it is out of the area, it is likely that profits go back to the same source – making the business more of a drain on the local economy than a contributor.
   The quality of jobs created in Whatcom County – as measured by wages, benefits and job security -have deteriorated significantly since the 1980s.
   The average wage in Whatcom County is about $29,000, and is compared to an average wage in the state of $34,330.  Most of the new jobs have been created in low-wage industries.
   Eighty percent of our workforce is employed in the retail and services sectors while only 20 percent are working in the goods producing industries.  The growth of the retail and services sectors can only be described as phenomenal.   The irony is that service and retail jobs pay far less than other industries.
For example, 13 percent of our workers are employed in retail businesses with an average wage of $21,300 per year compared to 11 percent that are employed in manufacturing businesses at an average wage of $47,600 per year.  The data might indicate we have done well in quantity of jobs created, but maybe not so good in quality of the jobs created.
   Higher wages for our workforce is a more important objective for economic development than is just the creation of more jobs.
   Many communities overlook the importance of the traded sector industries in the quest for tax revenues.
By way of definition, Traded Sector Industries are firms that sell goods or services to customers outside the region and bring the profits back to the community.
   In Washington, as in most states with sales tax, many cities equate expansion of retail employment as real economic development because it comes with an increase in sales tax revenue.
   What is overlooked is the fact that it is an adequate supply of disposable income that really drives retail.  It is the traded sector industries that provide the real potential for higher wages, and higher wages directly relate to more disposable income.
   While retail and retail employment is important to the economic base of a community, more retail is not the answer to government budget shortfalls.
   The best hope the public sector has to solve the current budget crisis is to encourage economic development programs that aim to increase the availability of jobs that pay higher than average wages.
Higher-wage jobs will increase the overall wealth in the community and create more disposable income for its citizens. 
   More disposable income will create more opportunity for our citizens to save, invest, and purchase goods and services.  This is what combines to make a healthy and sustainable local economy.

Rob Pochert is the executive director of the Bellingham/Whatcom Economic Development Council.


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