March 24, 2023 — Modern Economy Project
What actually happens when an employer decides to invest in a local community by relocating or opening a new space?
Like most discussions about our modern economy, this question sparks robust debate. But that debate is typically rooted in anecdotes and outdated notions of how the economy actually works. And while employer investments often elicit splashy headlines about the number of initial jobs the project will create, the lasting impacts on those in the community gets forgotten. What happens next?
We should look at the facts – but that’s easier said than done. Surprisingly few studies have examined the long term impacts on local communities when employers come to town, open up new facilities or make other community investments.
So The Modern Economy Project went to work.
Over the past several months, we partnered with Oxford Economics – a global leader in economic forecasting and analysis – to conduct a first-of-its-kind study of these effects. And this week, we hosted a briefing on Capitol Hill for policymakers and Congressional staff detailing what we found.
Our discussion was led by former Congresswoman Stephanie Murphy of Florida, a leader on economic policy, and Laurence Wilse-Samson, Lead Economist for Economic Impact at Oxford Economics.
The findings from our research – which will be complete and fully released in the coming months – indicate that employer investments bring substantial benefits to the host community, and that these benefits are sustained and, indeed, build over time.
”Most elected leaders, regardless of party, instinctually understand that employers that invest in communities can have dramatic positive impacts. But without having more data like this, some of the voices on the extremes that are pressing populist messaging can skew the policy debate with divisive and outdated rhetoric. So we really want to get back to the facts and deal with the real modern economic challenges that we have ahead of us,” said former Congresswoman Murphy.
Counties see more business establishments, higher average earnings, lower unemployment and positive trends in healthcare coverage.
“Too often, the conversation is just framed in terms of the number of jobs," said Laurence Wilse-Samson of Oxford Economics. “But it needs a broader context about what are the dynamic impacts of investment over time.”
Specifically, our research found the following:
After five years, we found that counties which experience investments by large employers enjoy the following benefits:
New business formation. Large investments stimulated business formation with an increase in the number of business establishments compared to what otherwise would have occurred without the investment.
Average annual earnings increased. Local workers experienced greater prosperity with higher average earnings.
Unemployment decreased. Investments led to a rapid and sustained drop in the unemployment rate compared to what otherwise would have happened.
Our research also suggested that the impact of these investments led to positive impacts on healthcare coverage and a sizable increase in the labor force participation rate, along with a reduction in the rate of violent crime.
Even after the full results of this first round of research is complete, future research will need to examine which sorts of projects are most successful, and what policies and practices can help to make large investments succeed, and The Modern Economy Project will continue to be on the front lines of such research to help advance the conversation in Washington on our modern economy.
As former Congresswoman Murphy said: “What I found when I was working in Congress is often it's easy to resort to rhetoric or to the popular tropes or themes of the moment as opposed to digging into the details. But really, it's digging into the details that allows you to craft good legislation that can help the American people.”