I’ve never been in a tsunami, but that is what this coronavirus situation feels like: the initial event has happened, and the ripple effects are just beginning to play out. Many of our clients and colleagues have been asking us what we think the impact of this sequence of events will be on their communities and on economic development, so I thought I’d share our thoughts more broadly. As this situation is still evolving daily, if not hourly, we’ll do updates as appropriate, and as always, we welcome your feedback and comments.
My first observation is that economic developers are some of the most resilient, creative, and solutions-focused professionals out there. When unexpected crises like this occur, we are at our best. I want to give heartfelt acknowledgement to all of you who have worked around the clock to pull together resources for your communities and to reach out to shell-shocked businesses, partners, and investors with information and support. For those of you in municipal organizations, many of you are on the front lines of basic services as well, which makes your continued focus on economic development and local businesses even more remarkable and appreciated.
Comparison of this “Pre-Cession” to the Great Recession
Compared to the 2008 Great Recession, our current situation is different in several key ways. (And since it takes two subsequent quarters of negative growth to create a recession, we consider the period we are in now a “pre-cession.”)
- The big difference between 2008 and now is that the economic situation we are in now resulted from a distinct cause – COVID-19. You can argue that the virus was just the straw that broke the camel’s back, but regardless, there is a focus on a very specific cause this time which I think is promising, assuming we can get testing, vaccines, and the other health preparedness steps achieved.
- Likewise, this precession also hit us seemingly overnight: the speed at which our economies have been affected is unsurpassed. Hopefully that means it will be able to recover quickly as well.
- This is a global crisis. During 2008, some other countries were better off than we were. In this instance, there is no escaping – the virus has no borders and literally every country will be impacted.
- With the rise of technology-enabled services, this time many of us have a viable option to work remotely. This is helping to maintain at least some segments of our workforce.
- And finally, as with last time, we see a clear distinction between those industries that are the “winners” and the “losers.” At the top of the list of “winners” are grocery stores, delivery services, healthcare, mortgage providers, internet and broadband services, collaboration software companies, medical supply companies, paper companies, food companies, and other industries that make necessities such as hand sanitizers, soaps, etc. And on the other end of the spectrum we have most restaurants and bars; religious institutions; entertainment industries (sports, concerts, etc.); travel and tourism industries (airlines, hotels, Airbnb hosts, museums, etc.), and many “non-essential” manufacturers and retailers.
Impacts to Economic Development Organizations’ Activities and Outcomes
- Over the past couple of years, we’ve been incorporating the concepts of economic equity and economic mobility into the Economic Development Strategic Plans that we develop for clients.
- Not only will this continue, but discussions about economic sustainability and resiliency will become more prominent as EDOs reach a higher level of understanding of what’s important for their community’s vitality long term. If your strategic plan metrics still focus primarily on jobs and investments, it’s time for you to take a fresh look.
- The shift toward BRE and away from business recruitment will continue. The situation is different, but the reasoning is still to protect and support existing employers first.
- In the short-term, many EDOs have done more than their annual quota of business retention & expansion (BRE) calls in the space of a few short days. They’ve served as critical information links between state resources and local businesses as state governments work around the clock to stay ahead of the curve and to provide the types of support that are in highest need. I expect BRE to get more attention and support across EDOs of all sizes, both rural and metro, as well as local, regional and state.
- One notable exception to the reduced focus on business recruitment is that as communities consider their own resilience, they may target specific industries that can help them improve their industry diversification.
- EDO’s focus on talent will continue.
- The fundamentals of our industry are such that simply focusing on the “old” three legs of the stool of business development– business retention and expansion, business recruitment, and business start-ups – is insufficient. Attention must also be placed on talent development (which includes talent retention and development) and placemaking.
- I’ve written about this topic extensively, and several of these articles are the most frequently downloaded from our blog, such as https://adyadvantage.com/as-i-see-it-the-new-three-legs-of-the-stool-of-economic-development/.
- More EDOs will be moving into more nuanced and holistic approaches to economic equity and economic mobility that provides laser focus on specific categories of occupations most at risk of becoming obsolete.
Impacts to Our Communities and the Economy
What is going to change as a result of all this? The question might be better framed as what won’t change, because now that all these things are out of the Pandora’s box, they are not going back in. Here are some predictions:
- Remote working, in some manner, will persist in some format even after the health crisis is over. Why? Because it works, or at least, it can work. It provides great flexibility to employees and it has the potential to provide similar or improved productivity to employers.
- Among other impacts, Class A office space will become less important for many employees, and by extension, employers. One of our clients with a lot of Fortune 100 companies in their area has gone so far as to say, “Class A office space is dead!”
- IT security will become much more important as companies work to ensure home networks are as secure as on-site networks.
- Remote work policies will keep HR consultants busy for the near future.
- Areas with broadband and housing will be attractive places for people to live, whether these people are retirees, generation Z or anyone in between.
- Broadband, which has been on rural America’s perennial wish list, is now a crisis in its own right. Expect more resources and advocacy for this critical need.
- Affordable housing – for lower-wage and mid-wage families – is in short supply in many areas. Thoughtful policies and municipal support will be required for most communities to succeed.
- What about automation and AI?
- That’s a broad topic worthy of an entire blog by itself, but our answer is that it will gain a significant toehold in key industries (delivery and transportation, manufacturing, hospitality, for example) and occupations (anything customer-facing or with lots of repetitive physical or mathematical processes).
- If you haven’t already, check out the work that McKinsey Global Institute has done on the topic and the automation indices that Emsi has developed. Once companies invest that money and see their returns it will be hard for them to turn back.
- And the big question is what will happen to talent? For so long, it has been in short supply, and now overnight hundreds of thousands are on unemployment insurance.
- There might be some short-term relief for industries and occupations that are going through boom times right now (unemployment offices are hiring, as is Amazon), but I believe as this precession/recession persists, it will serve as a “reset” button for many industries (retail chief among them) as entire industries adapt or become extinct.
- I believe the plight of workers, especially lower-paid, lower-skilled workers will come to the forefront and become one of the key challenges’ communities will need to solve for their own long-term success. This is where the rubber will hit the road for economic equity and mobility and is a goal of many of the Economic Development Strategic Plans that we develop for clients today.
- The consequences of not having a plan for addressing economic inequity and immobility are significant: essentially, the risk is a great increase in social services and drug use. Late last year, an academic paper on this topic was published in the journal of the American Medical Association, statistically correlating the lack of economic opportunity to increased drug use, which is what many of us in the field have seen for years.
- Efforts to enhance employee engagement and development will continue to be required of employers to help ensure they attract and retain the cream of the crop. If you missed the milestone, millennials and younger surpassed baby boomers as the dominant force in the labor market back in 2018. And today, most kids in the U.S. are themselves children of millennials or Generation Z. These younger generations make decisions based on values, and companies who are attuned to those values are better positioned than those who are not.
As I mentioned at the start of this post, economic development professionals are some of the most creative, innovative, tireless, results-oriented, unflappable people on the planet. This is our time to shine and to show our communities what we do for a living, and more importantly, why. The turmoil may appear to be great right now, but the opportunities it presents are even greater for those who understand how the changes we’re forced to make today, will become permanent aspects of how we will work tomorrow. Please do not hesitate to reach out to Ady Advantage if you need help navigating these changes.