Topic: Miller College of Business

January 21, 2016

In a major switch from decades earlier, Indiana’s employers began moving closer to current and potential workers in the 2000s, a trend government and economic development personnel must embrace, says a new policy brief from Ball State University.

What Comes First, People or Jobs: Evidence and Lessons for Indiana,” an analysis by Ball State’s Center for Business and Economic Research (CBER), compared population and employment growth of Indiana’s 92 counties during the 1970s and 2000s.

The study controlled for educational attainment, initial population, urban and rural influence, natural amenities, income inequality and intergenerational mobility and the size of local government. The findings were consistent with about 25 previous studies on the issue.

CBER’s study found that during the 1970s, Hoosiers sought communities with “help wanted” signs in abundance, but during the 2000s, firms and their jobs began to follow people looking for nice places to live.

“The clear implication of this finding is that policies that focus on relocating capital investment such as a new factory, in order to move people to jobs, will be ineffective,” said Michael Hicks, CBER director and the George and Frances Ball Distinguished Professor of Economics in the Miller College of Business. “In contrast, policies that effect the relocation of people to regions will also increase employment availability.”

The study found:

  • Education attainment for employees matters for jobs in both the 1970s and 2000s, but did not play a role in population change several decades ago.
  • Amenities played no role in job growth in either decade but were correlated with population growth.
  • Urban influence of a county did not have an impact in either decade.
  • Regional development – or the clustering of employment opportunities in several adjoining counties had a significant impact on population and job growth as commuting became an option for two-income families.

Dagney Faulk, CBER’s research director and co-author of the study, points out that as early as the 1970s economic development in Indiana focused on luring employers to communities in order to bolster population.

“That policy could be viewed as appropriate in the last few decades if accompanied by larger investments that boosted human capital and quality of place in communities — like good schools and parks,” she said. “However, by the beginning of this century, policies solely to bring a factory to town no longer had meaningful impact on communities, regardless of their purported success.”

CBER’s research points out that over the past 15 years, the most successful places in Indiana have done the least business attraction such as offering generous tax breaks and grants to a new employer. Instead, these communities focused on improvements to quality of place and education.

“This suggests that these policies should be widely mimicked throughout the state,” Hicks says. “This analysis suggests that business attraction does not grow communities at the county or sub-county level, though at the appropriate regional level, business attraction may be a useful policy adjunct. There is evidence that the largest urban regions have greatly reduced their direct business attraction efforts.”