Brain Gain: What Works, What Doesn’t

YOUNGSTOWN, Ohio — A newly released white paper from The Brookings Institution, prepared by Joseph Parilla and Sifan Liu, concludes that talent-driven economic development underscores a fundamental tenet of the modern economy: Workforce capabilities far surpass any other driver of economic development. 

The white paper aims to help economic development leaders recognize that the future success of both their organizations and regions is fundamentally intertwined with talent development. 

What follows is a summary:
Economies grow when they develop and deploy their people in ways that maximize their productive potential.

Structural shifts in the labor market now mean that human capabilities are the fundamental driver of regional and state economic development. The collective knowledge of the U.S. population is worth approximately $240 trillion, far exceeding the value of other inputs to economic growth. 

Educational attainment – the core, albeit imperfect, metric for gauging knowledge and skills – is one of the best predictors of economic success for an individual, organization or community. How talent is developed and deployed, therefore, is of fundamental concern to local and state economic development organizations.

Economic development objectives — business growth and worker prosperity — are mired by two labor market challenges.

First, talent development pathways are too unclear and unequal, limiting the supply of prepared workers. 

Broadly, three issues undermine talent development: (1) the U.S. favors a narrow “four-year degree for all” pathway to good jobs, (2) alternative pathways beyond traditional higher education are difficult for individuals to navigate and (3) the entire talent development system suffers from racial and economic inequities that restrict the nation’s productive potential.

Second, private-sector hiring and training norms have shifted in ways that undermine inclusive talent development and deployment. 

Depending on the estimate used, the U.S. corporate sector invests anywhere between $90 billion and $590 billion annually in training, but it tends to disproportionately go to highly educated workers, which limits inclusive talent development. Meanwhile, changing corporate norms and power imbalances between companies and workers undermine talent deployment by inserting unnecessary barriers between job seekers and jobs. These include degree inflation, experience inflation, non-poaching agreements, and outright discrimination.

Economic development organizations were not designed to address these labor market challenges, hindering their effectiveness in a talent-driven economy.

Workforce quality is paramount to core economic development interests such as business attraction, retention, and expansion, and 95% of executives rate the availability of skilled labor as “very important” or “important” to their investment location decision. But each year, only 2% of the country’s $50 billion in economic development incentives goes to job training, even as the return on investment from customized training is about 10 times that of traditional tax incentives.

Economic development organizations can reorient their activities and expand their capabilities by generating talent intelligence, developing incentives, and supporting systems.

There are roles and responsibilities that economic development organizations are filling or could fill with renewed focus. 

Drawing on a review of dozens of local and state initiatives, and interviews with over 50 leaders in workforce and economic development, and education, the white paper outlines challenges and potential applications in three areas:

RESEARCH

Economic development organizations can raise awareness of key economic challenges and opportunities through rigorous research on regional trends and targeted outreach to business leaders to motivate action.

New application: Generate talent intelligence research products, outreach campaigns and feedback mechanisms that help employers communicate skills needs and adopt hiring practices that address talent constraints efficiently and equitably.

RESOURCES 

Economic development organizations, typically city and state economic development departments, can deploy financial benefits or customized services to attract, expand and retain businesses.

New application: Develop talent incentives that utilize public financing and technical services to encourage employers to invest in worker skills and productivity.

RELATIONSHIPS

Economic development organizations can co-anchor systemic change by pushing the business community to address socioeconomic challenges. 

New application: Support talent systems by helping businesses engage with the education and training system, from middle school through post-secondary education.

Five discrete priorities for economic development leaders.

Taken together, the framework provides one vision for how a talent-focused economic development approach can better accomplish its core mandate: help firms grow and create good jobs. How should economic development leaders proceed? The white paper concludes with five discrete priorities for economic development leaders:

1. Realign state economic development spending to invest in proven training solutions, such as customized job training grants and community college partnerships.

2. Target economic development incentives toward opportunity-rich business practices that help build local talent pipelines.

3. Develop and disseminate new skills-based hiring tools that facilitate more efficient and equitable hiring practices.

4. Test new local talent financing solutions, such as revolving learning funds that target training toward high-demand jobs.

5. Experiment with new regional talent exchange intermediaries that connect middle schools, high schools, community colleges, higher education institutions and in-demand skills providers with businesses in key growth sectors.

Read our MidNovember edition to see how our region stacks up.

SOURCE: The Brookings Institution, Oct. 15, 2019. “Talent-driven economic development: A new vision and agenda for regional and state economies.”

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