Create Good Jobs and Promote Higher Performance with Economic Development Dollars

By Stephen A. Herzenberg

In Steal this Agenda: Blueprint for a Better Pennsylvania, released in September of 2000, the Keystone Research Center recommended that state government should "pave the high road" — make it easier for firms to profit by pursuing high-skill, low-waste business plans.

Such a strategic departure from more indiscriminate efforts by state government to be "business friendly" would lay the basis for higher living standards, a better quality of life, and more environmentally sustainable development.

State economic development programs, overseen today by the Pennsylvania Department of Community and Economic Development, should be an important component of an overall state policy shift to promoting good jobs and higher performance.

The briefing paper elaborates how Pennsylvania economic development policy should be reformed to promote the high road.

From the perspective of an overall strategy of promoting the high road, Pennsylvania’s current economic development programs are a mixed bag.

Some programs subsidize individual businesses with insufficient regard for job quality or whether the state gets much bang for the buck.

Some programs support innovation, technology deployment, and better organizational practices, but ordinarily on a firm-by-firm basis.

In other cases, the state seeks to strengthen the skill or technological infrastructure that helps whole regional industries take the high road. These programs in Pennsylvania are already stronger than in most states and are a foundation for an overall shift toward promoting the high road.

The state could establish a high road economic development policy that would be a model for the nation by implementing six recommendations.

1. Reduce total spending on subsidies for individual businesses and increase spending on workforce development.

2. Strengthen disclosure, anti-piracy, anti-sprawl, and "clawback" provisions (that require partial or complete repayment of subsidies if businesses fail to meet job creation or other goals) modeled after those in best-practice states such as Minnesota and Maine.

3. Require that individual businesses that receive state subsidies
pay at least 150 percent of the state minimum wage,

pay at least 85 percent of the industry average wage in their county or metropolitan area (and higher if they do not provide health insurance),

receive less than $35,000 per full-time, permanent, and new job created, with all subsidies counted in the event that a project receives two or more subsidies, and

4. Require that individual businesses that receive state-subsidized technical assistance (from technology and modernization programs) meet job quality criteria.

5. Use competitive grants and a recognition and rewards programs to strengthen the capacity of institutions linked with multiple firms (such as industry associations, training partnerships, and best practice occupational education programs) to improve industry performance.

6. Establish an Industry Performance Index program through which Pennsylvania industries, policymakers, and the public can gauge progress along the high road in specific industries.

This document is an on-line summary of a Keystone Research Center report. The entire report is available for download as a PDF file at the KRC Web site www.keystoneresearch.org © 2001 Keystone Research Center