being as smart as Ireland?
While in KC, I met one guy who’s done rigorous work on the relative impact on job creation of business attraction, business expansion and business creation. the numbers may be jarring, but [wonk alert! wonk alert!] read on for the good news for Idaho!
The best evidence we have is that the economic multiplier for an entity that moves to or expand into a [new interstate] location is rarely more than 1, usually less than 1. [Less than 1 is bad.] The economic multiplier for existing businesses that expand averages ~2 (that is healthy). The economic multiplier for startups range from 2 to 4 (4 is very good). However….
No matter what the source, the benefits of gaining jobs persists (and the negatives from losing jobs also persist). If jobs move from A to B, B gains more (in terms of multiplier) than A loses, but that’s little consolation for A. So whatever your strategy… be bloody good at it. Here are a couple of insights…
The best businesses for a community to recruit are thus its existing base. Help your own already-successful businesses to expand. We sometimes lose sight of that. The only problem is that if we ask existing businesses what they need (or if you ask potential entrepreneurs) we may not like what they tell us.
The other great burst of research looks at “knowledge spillover” - what we learn from each other. Ireland is an example of successful recruiting where they identified a few very specific areas where they had sufficient talent already where they could learn from the in-migrants. They ruthlessly limited business recruitment to those narrow domains. They focused university S&T funding to those specific areas as well (many howls over the shift toward applied research). It worked*** - new firms sprung out of this rich new soil. (And funding for basic research is now higher than ever, LOL.)
OTOH, Wales’ strategy was to find low-skill, low-wage jobs for their displaced workers (e.g., miners) . Result? Instant brain drain.
We may not be Ireland yet, but at least we aren’t Wales, are we?
Anyway… how might we focus Idaho to reap the benefits of knowledge spillovers? Do we start with the existing tech platforms? Do we re-visit those? Where do we already have strong, sustainably competitive expertise? (Name me the things where Idaho is considered the best in the country/world?)
(Sorry for the optimism…. LOL)
*** they also integrated this with very entrepreneurial educational innovations. (K-12 & community colleges should take heart! Happy to share, if you like.)
The smartest and most effective action Ireland took was cutting the corporate income tax rate to 10% (now 12.5%). For any company wanting access to the EU, it was and is compelling (other Western European countries are in the 30-40% range). Companies will invest capital where it is taxed the least, just as they will buy labor where it is the cheapest. No one should be surprised that Ireland is the rocket of Europe. Other countries will have to cut their income tax rates to compete for investment.
Thanks, Pete- true dat. And lower tax rates, whether corporate or personal, do predict job creation.* However, they also did a nice, under-the-radar-screen job of making sure that they were attracting firms that would grow Ireland’s economy - that maximized knowledge spillover.
By the way, this targeting included Ireland’s ag industry which has reputedly gone from the 19th to the 21st Century in under a decade by investing only in cutting-edge approaches [this is about innovation, not just high tech]
It’s all about aiming at the economy of the future, not the economy of the past. And figuring out how to jumpstart it (so the tax policy was/is invaluable).
* I had to go look this up, but the economic multiplier for public-sector, non-military jobs is pretty much 1 at best [no impact], military-related jobs are a bit better.