Transcript Siamese Twins: Family Economic Success and Community

Siamese Twins:
Family Economic Success
and
Community Economic Success
You can’t move one without
moving the other!
Traditional Economic Wisdom:
Invest at the Top & Wealth Trickles Down
Most community and economic development programs
are built on one faulty premise:
Investing in job creation will build the local economy and families
will do better as the investment at the top trickles down
The persistence of low wages and economic instability
in many places with full employment and worker
shortages demonstrates that investment in jobs is
sometimes not enough
Some economic models show that investment in
creating low-wage jobs can suppress a local economy
How can over-reliance on job creation
and “work first” hurt?
Forcing low-income workers to accept low-skill / low-wage
jobs while ignoring barriers to employment can limit their
ability to keep a job and attain skills needed to advance
Trapping workers in low-skill jobs hurts the quality of the
workforce & reduces business productivity and profitability
This puts downward pressure on wages and reduces
business competitiveness and stability
Businesses that rely on low-wage labor are often forced to
look overseas for even lower wage labor to compete
Government costs go up as it is forced to provide more and
more services for low-income families, increasing the tax
burden
Ignore families and workers and…
Workforce
Quality
Stagnates /
Declines
Business
Productivity
Suffers
Business
Profitability
Decreases
Barriers
Inhibit
Work &
Skill
Training
Government Invests Less in
People, Services and Place
…the Economy
Spirals Down
Businesses Close, Outsource,
or Freeze / Reduce Wages
Workers
Have
Less to
Spend
Government
Receives
Less Tax
Revenue
Service / Retail Firms
Close or Shed Jobs
Service &
Retail Sales
Decrease
New Economic Wisdom:
Invest in Workers and Wealth Gushes Up!
If you invest in barrier reduction and job skills, you will improve
business productivity and profitability
If you increase productivity and profitability, businesses can pay
more, they become more stable and they build stronger ties to the
community
Higher wages for families earning the least circulate in the
community, create more jobs and a build a healthier community
economy
People already doing well do better in the long run because their
businesses and employers thrive
Communities prosper as higher incomes and increased community
wealth boost tax receipts -- allowing them to do more with lower
tax rates
Increasing Family Income:
The Multiplier Effect
Low income families spend about 70% of every new
dollar they receive locally
– Percentage spent locally decreases as income increases
– Increasing income at the bottom contributes more to a local
economy than increasing it at the top
In 2006, each $37,000 in additional income received by
low-income families in a community created one new job
– This includes benefits, transfer payments, tax-credits, and
wages
Small wage increases add up!
– $1.00 / hour for 19 FT workers = one new job
– $.50 / hour for 37 FT workers = one new job
– $.25 / hour for 74 FT workers = one new job
Invest in workforce skills and reducing barriers and…
Workers
Are Better
Prepared / Have
Fewer
Barriers
Government Invests More
in People, Services and Place
Government
Receives
More Tax
Revenues
Workforce
Quality
Improves
Business
Productivity
Increases
the Economy
Spirals Up
…
Service & Retail
Businesses Thrive /
Create More Jobs
Service
& Retail
Sales
Increase
Business
Profitability
Increases
Businesses Hire
More Workers and / or
Increase Pay
Workers
Have More
to Spend
A Case in Point: The Tupelo Story
1950 – poorest region in poorest state in union
Invested in the poorest people - increasing the value of their
work and predictability of their income by helping them move
from growing crops to raising pigs and chickens
Better farm income boosted Main Street sales – and raised
incomes for middle-class and wealthy residents too
Continued to invest in people and their skills
Local businesses prospered – outside businesses were
attracted to the quality of their workforce
By 1980’s the Tupelo region became one of the fastest
growing / most prosperous areas in the south
Many companies have been attracted by the quality of their
workforce - including Toyota which build a new plant in 2007
So what does it take for both families
and communities to do better?
Enough jobs to go around
Strategies include:
Entrepreneurship programs and new business supports
Business retention and expansion programs
Sound advice on management, financial and technical issues
Investment capital at reasonable terms
Skilled, productive workers & stable families
Strategies include:
Effective K-12 and higher education systems
Services and supports for families - transportation, childcare, etc.
Worker training that meets employer needs
Community support for both families & businesses!
Every family must somehow
reach or surpass “The Line”
Anything and Everything Else
Savings, Investments, Retirement
Luxuries, Treats, Indulgences
Entertainment, Gifts, Vacations
Healthcare
“The Line”
Taxes
Childcare
Transportation
Shelter
Clothing
Food
It is how families reach the line
and how much they surpass it
that helps or hurts a local economy!
Remember - when families do
better economically…
…it helps in non-economic ways:
Improves physical and mental health
Improves community stability
Creates an orientation towards the future
Stimulates savings & development of assets
Provides a foundation for taking sensible risks
Increases social & political participation
…and enhances the welfare of generations to come!