(Market & Main Streets) Employers follow workers

Our economic strategy should too

Taylor Caswell

Over the course of my career, I have attended my share of ribbon-cuttings that were the result of a lot of effort to recruit a new company into the state.

These are big wins, usually well attended by the media, senior executives and elected officials.

But for every one of those, there are a dozen stories of companies already here quietly adding a shift, creating jobs and economic activity that nobody covers. Those quiet second cases are the true foundation of a successful economic strategy.

Economic development conversations eventually get to the same question: How much effort goes to recruiting new companies versus supporting the ones already here? (By support, I mean retention work via direct technical assistance, not paying them to stay.)

In today’s scoreboard politics, recruitment often wins that argument. A new company is a visible, attributable “win,” preferably at another state’s expense. That makes good headlines. It doesn’t always make good strategy.

Think of it like an investment portfolio.

Existing businesses are your core holdings, recruitment is your growth position, and the business environment is your market conditions. Core holdings compound quietly. Growth positions carry more risk and take longer to pay off.

Also consider government resources, particularly in a state like ours with limited revenue and a resulting demand for creative, highly leveraged policy strategies. Recruitment is a specialized staff effort with long time horizons.

The odds are often long, too, because we are making the case to companies unfamiliar with New Hampshire’s advantages that it’s worth coming here without us paying them to do so.

Directing resources toward companies that are already here makes sense on the numbers. Economists consistently find that expansions of existing companies and new startups drive nearly all job growth, while companies relocating across state lines barely register. And research from the Upjohn Institute’s Tim Bartik finds that practical help like customized job training and manufacturing extension services creates jobs at a fraction of the cost of cash incentives.

The true heart of the matter for both recruitment and retention is workforce. For most of the last century, workers followed jobs. Workers went where the mill or the plant was. In many instances, that dynamic has flipped, and COVID accelerated it. Today, most employers go where the workers are, or where they can count on finding them. That is absolutely my experience in New Hampshire.

Economic policies aimed at growth should prioritize the market conditions that make growth possible: places where workers want to live and where employers can count on finding them. Addressing issues and systems like housing, childcare, training pipelines, the state university and community college systems, and our massive investment in broadband infrastructure all pay back by creating the conditions for a dependable workforce.

Our often-cited NH Advantage of no sales or income tax speaks directly to this strategy. After all, those benefits go to workers more than to companies. No income or sales tax means someone who moves here and takes a similar wage gets an automatic raise. But that raise only matters if workers can find a place to live, and that’s where shrinking housing affordability hits. Without places to live, that advantage is diminished or eliminated altogether.

And when it comes to the act of recruitment itself, our existing businesses make the best case for New Hampshire. They’re here because this is where they believe they can grow, and that kind of commitment is worth more than any incentive package. They can grow here as we remain focused on the market conditions that provide long-term confidence in meeting growth goals here better than somewhere else.

Maintaining the balance between recruitment and retention means a strong focus on existing employers, with regular connection by regional professional staff. It means providing real assistance, not just visits and photos, by understanding their needs and their plans to expand.

It means resources to speed permitting, financing and new training partnerships. It means using what we learn from them to target recruitment, such as filling supply-chain gaps. And in the end, it means measuring net job and wage growth rather than tallying announcements and ribboncuttings.

No strategy has a silver bullet. Recruitment is part of a long-term growth strategy; it is not THE strategy. Everyone loves a ribbon-cutting, but those quiet new shifts are the wins worth counting.

Taylor Caswell has led economic policy agencies on the state and federal level for decades, most recently serving as New Hampshire’s commissioner of business and economic affairs. You can reach him at linkedin.com/in/taylorcaswell.