No piece of legislation or executive order can reverse economic realities that have been decades in the making.
Co-authored with Jason Sosa, a Partner at Chameleon Collective, and Dean Whittaker, Founder & President of Whittaker Associates
Ten minutes from downtown Holland, Michigan, there is a massive $300-million plant that manufactures advanced battery cells for electric vehicles. When it was first announced in 2009 that LG Chem would be setting up a subsidiary in the small town of 34,000 people, government officials planned for an economic revitalization. They spared no expense to woo the Korean giant. The local, state, and federal government awarded over $250 million in tax subsidies, grants, and concessions, promising that Michigan would become “the world capital for advanced batteries.”
The plan amounted to spending $750,000 for a job that pays only $54,000 a year. And along the way, much of the money was wasted. A 2013 federal investigation found that employees were “paid to watch movies, play games or volunteer at local non-profits as production lines for battery cells sat idle.” They concluded that taxpayers were to see little upside for their investment. While the plant did go on to later hire hundreds of workers and produce some batteries, the program fell far short of expectations. Today, it serves as a reminder that top-down thinking is a recipe for disaster in the modern era. The days when small towns could give corporations large handouts to create industry and stability are long gone.
Instead, state and local governments will need to change their entire approach if they want to want to breathe new life into non-metropolitan areas. They must prioritize people over industry, and workers over corporations. They must focus on building for what’s coming next, instead of what has come before. And that can be accomplished by understanding the transformation of the way we work.
The professionals of tomorrow won’t necessarily be sitting at a desk from 9 to 5; in fact, they may not even be confined to any particular location at all.
We are witnessing the rise of a “freelance economy” - a transformation enabled by technology, but driven by macroeconomic factors. People now have the ability to find, receive, and complete work entirely through the internet. They can simultaneously be employed by multiple clients around the world. They generate income globally but spend their earnings locally.
“If the same incentives that were applied to big companies were instead given to workers, we would witness far better and more equitable results.”
The rise of online platforms such as Upwork, Toptal, and Freelancer have made finding clients and workers simple. According to research commissioned by the Freelancers Union, as of 2016 there are already 55 million Americans who are freelancing, earning more than $1 trillion a year. They’re able to find more clients, work for longer hours, and establish a reputation in less time. While a survey by Deloitte showed that independent contractors still have many concerns - lack of a working culture, inconsistent income, and few employee benefits - we are still in the early days of remote working. Younger generations show greater enthusiasm and optimism for flexibility over the corporate ladder.
Today’s remote jobs include design, research, writing, education, customer service, marketing, sales, legal, accounting, analytics, consulting, and engineering - as communication technologies advance, that list will only grow.
If the same incentives that were applied to big companies were instead given to workers, we would witness far better and more equitable results. Communities should consider offering freelancers breaks on property taxes, subsidies for learning new skills, and help with securing loans. They should spend their money on infrastructure projects related to high-speed internet and connectivity (for example, Holland, Michigan, just began laying the groundwork for a community-owned fiber network). Ultimately, this means investing in building local networks of people that can share skills and prospects with each other. They will serve as the town’s bridge to the outside world, bringing their community along with them. Like any network, its value will grow as it expands.
“Economic development strategies that rely on subsidizing corporations are dangerous.”
Economic development strategies that rely on subsidizing corporations are dangerous. Betting millions of dollars on creating an industry out of nowhere leaves an area extremely vulnerable to mismanagement and downturns; not to mention the technological risk of investing so much in something that doesn’t work as intended. By investing small amounts in many people, governments are minimizing their risk. At the same time, they’re uplifting the communities they serve.
Small-town America is facing a series of challenges which threatens its very existence: people are leaving, tax revenues are declining, and economic forces have wiped out jobs where people without a college degree could previously make a middle-class income. Despite this, these regions still have many advantages over the rest of the nation. Many towns still have a sense of community that is rare to find in large cities. There’s little traffic, cost of living is low, and houses are far more affordable. Especially for workers with children, these are critical factors that make a difference in day-to-day happiness.
These areas have felt the brunt of disruption and seen industry after industry fall into obsolescence. But with that has come the opportunity to gain from the new possibilities which technology has created. A farmer in rural Mississippi can take courses from Yale for free. Commercial drones will soon make transporting physical goods from one town to another drastically cheaper. Affordable virtual reality headsets will make it possible to see the world from anywhere. And robotics and 3D-printing will return high-end manufacturing stateside, back to some of the towns which it left two decades ago.
It’s important not to understate the difficulties ahead - what’s needed is nothing short of a change in mindset. Regardless of what politicians say, no industry can be returned to its glory days by scrapping regulations. Communities charting their future based on a desire for the past will surely be disappointed. Instead, they must look inward - by investing in their residents, and bet on people instead of policies.
