Should American Cities Attract Companies Or Workers?

A look at the chicken-and-egg question, as it pertains to Dallas.
By Scott Beyer | Oct 18, 2018 |
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By Scott Beyer | Oct 18, 2018 |
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Dallas is one of America's leading cities for attracting both corporations and talent. / credit to 10best.com

Whether American cities should have concerted efforts to attract companies or workers has long been a chicken-and-egg question. The traditional thinking within economic development circles was that by luring companies, cities would have the jobs needed to lure workers. In recent years, the mentality has reversed somewhat, with a city's ability to retain a young, educated workforce viewed as crucial to drawing corporate relocation.

The answer to this question goes a long way in determining the appropriate strategies. A pro-company agenda would mean advocating for lower taxes, or, as is often the case, corporate welfare. A pro-worker agenda could mean various things, including the notion that cities should invest in public amenities to boost their culture. Dallas, which has been one of America's recent leaders in both corporate and workforce growth, is an interesting case study in this debate.

On one hand, the wider Dallas-Fort Worth metro area is a business growth dynamo. It has been among the national leaders in corporate relocation, with 72 major companies moving there since 2010. The metro has 14 Fortune 500 companies, trailing only New York City and Houston. And it is currently America's top job market, with an unemployment rate at 3.7%.

The workforce advantages, meanwhile, are found in DFW's raw population size. The region, at 6.4 million people, is routinely among the nation's leaders in population growth, both in net and percentage terms. In a one-year period between 2015 and 2016, it added 143,000 people, tops in the nation. While education levels there aren't high by percentage, Dallas' sheer size means there are a lot of skilled workers to choose from. It has the 4th-highest net total of Millennials; and nearly 1.3 million of its workers over the age of 25 have a bachelor's degree or higher. The metro scores well at luring outside talent and retaining its college students after graduation.

So have Dallas' companies drawn these people, or have the people drawn the companies?

This is something that Jessica Heer, who specializes in talent attraction for Dallas' regional Chamber of Commerce, has thought about a lot recently. She has spearheaded a new Chamber program called "Say Yes to Dallas" that aims to bring yet more educated millennials into the area. This is a diversion from the Chamber's traditional strategy of luring businesses, and highlights an increased focus within the economic development industry on workforce retention.

Heer said that rather than one preceding the other, the growth of companies and workers moves in tandem, and if anything, swings more towards the need for existing workers. Companies may be lured to Dallas--and Texas at large--because it has friendly tax and regulatory policies. But Dallas' existing labor pool is also viewed as a huge plus. Then once companies locate there, additional outside workers will move to Dallas in response, creating a reinforcing loop.

“It’s like a NASCAR example, or maybe a horse race,” said Heer, about the way in which companies follow workers, or vice versa. “It’s nose-to-nose right there at the end.”

The question then, either for workers who moved to Dallas before or after finding jobs, and who decided to stay, is--what keeps them there? One idea--which is a spinoff of the "creative class theory" populaized by urbanist Richard Florida--is that investing in urban amenities will attract these educated workers. This seems a sensible enough theory for cities like New York and San Francisco, where the existing mix of urban density, public transit, fine arts and alt culture has created an atmosphere that people pay a premium for (although it's unclear whether those cities really need further cultural investments).

But such a theory doesn't quite explain the appeal of Dallas. The metro is nice enough, with countless stand-alone cultural entities, including 5 major pro sports teams, world-renowned arts institutions, trendy nightlife districts, and historic neighborhoods. Besides just Dallas and Fort Worth, the metro has 12 municipalities of over 100,000 people, many with their own charming downtowns.

But Dallas is not a place where these parts add up to make an awe-inspiring sum. It is instead a sprawling, fragmented metro with little activity in the core, and minimal civic life, at least not at street level. One is unlikely to live there just for the sake of living there.

Rather, people are seeking Dallas for more pragmatic reasons. One is its aforementioned job market. Another, says Heer, is its low housing costs. Median home prices in metro Dallas are about half of what they are for metro New York City, Seattle, Boston and Denver, and about 1/4th of San Francisco. This makes locating there better for multiple categories within the workforce, says Heer. Workers fresh out of college can afford to have their own place without roommates (a near impossibility in San Francisco). And older professionals who are “maybe considering marriage, home-ownership is important to them, and they’re living in a high-cost area where they can’t afford a home,” can actually buy one in Dallas. The reason that the metro's housing is cheap is that, despite all the population growth, it routinely has some of the nation's fastest housing growth as well, meaning prices have stabilized.

The takeaway, at least for Dallas, is that attracting both companies and workers is important, but not in any particular order. If a common denominator exists for attracting either, it is having an open economy--particularly open land-use laws. As I wrote in 2016, Dallas is good at drawing companies not only because of Texas' friendly tax policies, but friendly economic development policies. Companies can pick large land plots and build their headquarters without facing much government delay. The same goes for its approach to workforce housing. As new employees flood in from around the nation and world, large master-planned developments get built--again, without the red tape--to house them. All this suggests an argument less for trying to intentionally lure in either companies or workers, then letting each flow in "nose-to-nose," as their needs are met organically.

[This article was originally published by Forbes.]

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