Archive for Thursday, April 12, 2007

Quality of life is pro-business

April 12, 2007


The economic development and growth of Lawrence has been the subject of much debate and discussion - both historically and in the run-up to the recent City Commission election. At the risk of simplifying matters, on the one side of the debate we have "pro-business" or "pro-growth" advocates, who believe that Lawrence's economic future is in jeopardy due to excessive cost and regulatory burdens imposed upon employers. On the other side we have folks who might be labeled as "quality of life" advocates.

The predominant argument from the "pro-business" side is intuitively appealing: Since businesses prefer lower costs and less regulation, job growth will be stimulated by policies such as aggressive tax abatements and limited constraints and oversight on building and development. As a core economic development strategy, however, this approach is ill-suited for the marketplace of the future. It is short-sighted at best and, at worst, antithetical to long-term, sustainable economic development.

Competing for jobs and employers on the basis of cost offers a fleeting, short-term advantage that will dissipate as soon as another community (inevitably) offers a slightly better deal. Moreover, firms attracted by these inducements tend to be lower wage employers. More importantly, the strongest job growth is now occurring in knowledge-intensive sectors such as technology and consulting. Employers in these "new economy" sectors are attracted to communities that offer as their inducement a skilled and competent workforce.

The cover story of a recent issue of The Economist (10/07/06) described this competition for labor as a "Battle for Brainpower." Because of this quest for talent, business periodicals such as The Wall Street Journal publish stories of companies relocating within the United States to communities not because of tax incentives, but because of the lure of a skilled labor force. When company-community attachments are formed on this basis, they are more enduring than affiliations built upon cost.

In addition, employers attracted by labor force quality tend to be high-value companies offering higher-wage jobs. Thus, a differentiating, comparative advantage for communities interested in succeeding in the new economy is not cost, but capital - in the form of human capital.

How can Lawrence achieve this human capital advantage? First, we need to build human capital through a world-class school system that not only serves our college-bound student population, but also offers high-value, high-tech vocational training opportunities for noncollege-bound students. This requires partnerships with the business community in order to (1) identify employers' needs on a real-time, ongoing basis and (2) to provide real-world skills training to students via apprenticeship and internship opportunities.

Similarly, we also need to emphasize and encourage partnerships between our business community and a variety of research and academic centers within Kansas University. University partnerships are very attractive to new economy entrepreneurs and employers. In turn, KU is very interested in relationships that encourage commercialization and spin-offs of "laboratory" ideas as well as partnerships that provide internship and employment opportunities for students.

In addition to building human capital, Lawrence needs to continue to attract human capital and knowledge workers by preserving and developing community features that knowledge workers value. Investments in our information and technology infrastructure should not be considered luxuries, but instead should be viewed as necessary ingredients for successful participation in the new economy. Skilled workers with labor market mobility tend to gravitate to interesting, vibrant communities that have strong school systems for their children.

In addition to working with our newly elected school board, our City Commission should consider investments in recreational opportunities and the arts as well as policies that preserve green space and our wonderful downtown to be investments in economic development. These features serve to differentiate Lawrence as a desirable place for knowledge workers and, consequently, employers.

Yes, businesses prefer lower costs and, yes, they also prefer less, as opposed to more, regulation. But an over-emphasis on cost and unfettered development as an economic development strategy will not improve Lawrence's longer-term prospects. A more enduring strategy is to emphasize educational opportunities that build human capital along with policies that preserve our community and the quality of life required to attract and retain the skilled workers that employers need and want.

- James P. Guthrie is the William and Judy Docking Professor of Business at Kansas University. He has lived in Lawrence since 1988.


Kookamooka 11 years, 1 month ago

Hoorah! Someone who has it RIGHT!!! Unfortunately, this city has catered to it's "potential" human capital (college students who leave for bigger, more exciting cities)and it's empty nesters for too long.

As the baby boomers age out of their child rearing, the city will become increasingly reluctant to spend tax dollars on schools, parks and family oriented activities.

I see the Lawrence of the future filled with cafeterias (for the elderly) and bars (for the young). The families in the middle? They'll move to Topeka and Olathe, and so will all of the jobs. (Sorry!)

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