You might have seen this graphic passing around the internet this week. Are the strawberries below red or gray? It turns out they're actually gray. Read this article to find out why, and also for some insight into one big illusion that is often perpetuated in economic development circles--that job creation is always about the numbers. Companies often come into a community wanting incentives and promising jobs. But are the jobs they're promising worth the incentive?
First of all, in the previous image, you might still be convinced that you are seeing red... but I promise you, you're really seeing gray. You brain--similar to an automatic-color-balancer in a camera--is adjusting what you see because of the green tint. Your brain translates the green into white. In doing so, it also sees the gray as red. You don't have to know anything about strawberries for this to work. This is a feature of the human color perception system which ensures that the perceived color of objects remains relatively constant under varying illumination conditions.
Not unlike the optical illusion displayed above, we often see job growth figures tossed around that are boasting local, regional, or even national economic gains. But upon closer examination, we see that many of these jobs are often low wage--some very low. The chart below provides statistics on the ten largest occupations in the US in 2015. As can be seen, the average annual pay for eight out of ten occupations is below $30,000. Most of these occupations are associated with the retail industry.
This data from 2015 highlights a challenge that is often played out in small to medium sized cities all across America. Incentives are offered by these cities to attract businesses that are promising sales tax revenue and job growth. Each claim deserves serious scrutiny, particularly those associated with job growth. Part time jobs should be added up to count full time equivalent (FTE) jobs. While a typical big box retail store may have 200-300 part time jobs to cover various shifts, this often only adds up to 50 or less FTEs. And these retail focused jobs typically pay very little, often less than what is considered a living wage (a wage high enough to keep the wage earner out of poverty given the local cost of living requirements such as housing payments).
The bottom line is that while many businesses claim to be adding jobs to the local economy, relatively few add the more desirable high paying, permanent jobs. This is an important consideration that cannot be overlooked. While a local jurisdiction can liberally provide incentives to "grow at all costs," a more long-term, strategic approach will pay higher dividends. While enticing a small business of 20 employees may not look as good as adding a retail business with 200-300 jobs, that small business is the better investment (from the perspective of a local government that has limited incentive dollars to spend). Adding a handful of higher paying jobs that will allow employees to purchase a home in the area will have a profoundly more positive impact on the local economy than 200-300 part time jobs that will often not shift the economic indicators after closer examination.
The bottom line is that while many businesses claim to be adding jobs to the local economy, relatively few add the more desirable high paying, permanent jobs. This is an important consideration that cannot be overlooked. While a local jurisdiction can liberally provide incentives to "grow at all costs," a more long-term, strategic approach will pay higher dividends. While enticing a small business of 20 employees may not look as good as adding a retail business with 200-300 jobs, that small business is the better investment (from the perspective of a local government that has limited incentive dollars to spend). Adding a handful of higher paying jobs that will allow employees to purchase a home in the area will have a profoundly more positive impact on the local economy than 200-300 part time jobs that will often not shift the economic indicators after closer examination.
About the author: Kirby Snideman is an AICP certified planning professional with a focus in economic development and currently serves as a senior associate at CDS. Originally from Houston, Mr. Snideman has lived, studied, and worked in several places including Utah, New York, California, Iowa, Illinois, Oregon, and London, England.
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