Considered by many economists to be the worst downturn since the Great Depression of the 1930s, the Global Financial Crisis (GFC) of 2008 actually started a few years earlier, during the then-booming housing market in the United States, when subprime lending was recklessly given by banks to borrowers with poor credit ratings.
Home sales peaked in early 2007; the American economy was shaky, and there were warnings from economist and former Federal Reserve Bank Chairman Alan Greenspan about a looming recession. But the loans continued despite the rising number of heavily debt-ridden homeowners being unable to make payments. A storm of bad loans and other factors – including an abrupt downturn in the housing market and the bankruptcy of U.S. financial services giant Lehman Brothers in 2008 – resulted in financial uncertainty around the world for years to come.
Washington, DC-based International Economic Development Council (IEDC) President and Chief Executive Officer Jeffrey A. Finkle says workforce development became a much bigger issue for economic development organizations following the GFC. Joking that economic developers could not spell the word ‘workforce’ before 2008, Finkle says workforce development has become a top priority for economic developers in the post-GFC world.
The non-profit and non-partisan IEDC was founded in 2001 following the merger of the Council for Urban Economic Development (CUED) and the American Economic Development Council (AEDC). It is the largest economic development organization with more than five thousand members. The council is flexible to adapt to changes in the global economy.
“The fastest-growing job in economic development organizations is somebody focused on workforce,” states Finkle, a veteran Certified Economic Developer (CEcD). “They are not going to be a workforce solutions expert, but what they are going to own is relationships with all the workforce efforts in their region. They may be responsible for workforce attraction – which is becoming as important as business attraction – so that companies aren’t coming to the economic developers and saying, ‘We can’t expand.’ or ‘We can’t come to your community because you don’t have sufficient workforce.’ And we are seeing a whole variety of different types of approaches to this whole workforce issue.”
In 1972, before studying communications, economics, business administration, marketing, and business law at Ohio State University and embarking on a successful career, Finkle graduated from high school into a working world that was a vastly different place than it is now. Some of his classmates went to college, while others walked into automobile manufacturers, steel mills, and other industries and were immediately hired for their labor, not their high school education.
“Today, if you don’t have a two-year associate degree, many of these plants won’t hire you. Because it is so computerized and using robots, the number of people they are hiring is less,” he says. “And that’s just in the auto sector.”
One of the changes that the IEDC is witnessing is that brains are being used more than brawn in manufacturing sectors. Companies that need staff want trained workers, and economic developers are increasingly being called upon for workforce delivery systems to provide educated staffers, not just strong bodies as in the past. Before companies are willing to locate, re-locate, or expand operations to specific communities, they are asking economic developers about the availability of trained employees, workforce delivery systems, and just how effective those delivery systems are.
One recent example is online giant Amazon’s search, via a highly-publicized bidding process, for a second headquarters, to be known as Amazon HQ2. The retailer’s announcement was widely criticized by residents, activists, and politicians over issues ranging from Amazon’s proposed benefits and the potential spikes in the cost of living, leading some public relations experts to state that the company could have avoided the backlash entirely by bidding quietly.
Instead, it had a massive media campaign claiming job creation and billions of dollars being potentially pumped into the economy. It was unrealistic of Amazon to believe that it could find 50,000 available, skilled workers with advanced degrees in one community. In the end, Amazon selected two HQ2 sites: New York City and Northern Virginia.
In today’s global economy, economic developers bring a wealth of economic development experience and insight to communities of all sizes. Economic developers often serve as the middleman between planning departments and landowners and businesses. And this includes helping to rebuild communities when disaster strikes. Sadly, hurricanes, earthquakes, tornados, floods, and fire happen far too often. While first responders like police, firefighters, and paramedics save lives, the immediate and long-term economic consequences of natural disasters run into billions of dollars to repair and rebuild entire communities, homes, and businesses. Finkle personally surveyed damage to areas of Texas affected by Hurricane Harvey in 2017 and says the IEDC plays an active role in disaster relief efforts.
The IEDC decided that economic developers have the ability to do more for disaster relief. It recently held two training programs in Texas and is sending additional volunteers to work in hurricane-prone areas like Georgia, South Carolina, North Carolina, the Virgin Islands, and Puerto Rico. The council has also come up with money to assist when disaster hits. Its biggest partner right now is Southwest Airlines, which generously donated 150 one-way tickets for the council to use to send volunteers to affected areas.
“All these people go as volunteers, so each and every one is giving something,” says Finkle. “Often, their employer is paying while they’re doing it. So it is the true generosity from organizations like Southwest Airlines that we are actually able to do this.”
After the 2008 financial collapse, the issue of equality grew in importance to the IEDC. In the recession that followed the crisis, many people – minorities in particular – lost jobs and homes, moving from the middle class to poverty. Over a decade later, many of these individuals are still struggling to recover financially, leaving economic developers to question sustainability and how to use economic development to address the issue of equity.
Some massive corporations are focused simply on hiring the best people they can find, ignoring the wider implications for the community. This has led to economic developers asking how to find businesses willing to locate to inner cities and provide job opportunities for people of lower incomes. Additionally, there is the question to bringing training to less-educated people, to help them get the jobs that will improve their lives.
“Those are challenges many economic developers are working on, and the more urban they are, the more likely that is part of their agenda,” states Finkle, adding that another issue for development organizations is the creation of opportunity zones. Opportunity zones were established by Congress in the Tax Cuts and Jobs Act of 2017 to foster long-term investments in America’s lower-income urban and rural communities. Communities and are investors are poised to benefit from temporary deferrals, step-up in basis for capital gains, and permanent exclusions from taxable income from capital gains for investments made in qualifying zones.
“We’re not sure what that means yet,” comments Finkle. “There is an opportunity, and there is a possibility this may help encourage some development towards our central cities. Now, if it just gentrifies things and drives low-income people out, then we’ve not been successful.”
One of the ways in which the IEDC is responding to the changing face of economic development is through its group called Economic Development Research Partners (EDRP), which provides networking opportunities with other economic development professionals and cutting-edge research. Best of all, reports are available to IEDC members at no additional cost, and non-members may also purchase reports.
“We’ve been doing a lot of research on economic development,” says Finkle. Reports deal with such subjects as preparing for tomorrow’s economy, adding value through business retention and expansion, and how changes in energy industries will affect economic development.
Currently, the IEDC is working on a report titled Industry 4.0: What Are All these Advanced Industries from Advanced Manufacturing To Big Data. “Other than the one we are currently working on, these are all recent publications, so we are always trying to look around the corner and try to figure out what will be the changes into this crazy world we call economic development.”
Finkle has been at the same job for thirty-three years and recalls the early days of the IEDC and how it has grown from eight people to almost thirty today. Back in the pre-Internet days of 1986, fax machines, huge computers, and physical mailings were popular, and everyone had an office. “The speed of change is so much greater now,” he says. “I can’t tell you what’s going to happen six months from now, let alone three years from now.”
He does have some ideas of what the future holds, however. One of his predictions is that a good amount of the clothing industry – which moved to offshore manufacturers years ago – will return to the United States, mainly because of improved robotics. “We will be able to do stitch and sew in ways that we don’t have to put stuff on boats to ship it back from China or Bangladesh and wherever fabrics are sewn these days. Sheets, pillowcases, and towels are just too darn easy to do in a factory with virtually no employees. So I think there’s going to be some strange results that will happen over time, and industries we thought we lost forever may show up back here. The more people-intensive, the more likely it will go offshore; if you can make it less people-intensive, it comes back here.”