Economic development is a broad term that loosely refers to the financial growth and/or general economic health of a specific region. It’s usually used when referencing a specific city. Perhaps you’ve heard someone say something like the City of Portland, Oregon’s economic development has been booming for the last five years.
While this may be true, statements like these simplify a rather complex issue. There are many components that impact a region’s economic health. It can be tempting to worry if an area’s largest employer seems to be going through a difficult time, but it’s important to remember that businesses were not built overnight and with some very rare exceptions, they probably won’t crumble overnight either. Here are a few things to keep in mind.
How Does Economic Development Work?
From small rural towns to bustling metropolitan cities, all businesses, jobs, and local agencies are interdependently connected. If businesses are doing well, they will need to hire additional employees to help meet their demand for goods or services.
When people are employed and making an income, they will spend money in local grocery stores, restaurants, and retail stores. These purchases help ensure a steady cash flow which will keep businesses running successfully. This cycle is what keeps cities running successfully.
If a region’s most prominent employer experiences a substantial loss of income it can impact the entire region, but it also may not. And chances are, if a business was doing well before it experienced a downturn, it can become successful again. Most businesses will experience natural ebbs and flows over time.
Business Impact on Communities
Because of the interconnected nature of a city, businesses can have significant impacts on an entire community. If businesses are doing great, morale is usually high. And if businesses are struggling it can have a negative impact on the whole city. If a company is struggling and community morale is low, it is critical to maintain communication with constituents.
If something goes awry, most experienced business leaders recognize that it’s important to tell local stakeholders what is happening. Consumers value honesty and might be willing to help if they understand what’s happening. If a specific restaurant isn’t doing well and their customers know they may frequent it more often than they normally do.
How Does the Government Impact a Regional Economy?
Municipalities can play a crucial role in their economic development and overall financial health. Some government agencies offer attractive packages to businesses that are looking to relocate to their area. In addition to positive working relationships with the Planning Department, some cities are in a position to be able to provide low-interest loans to certain qualifying agencies, provide fee waivers for costly permits, and/or offer reduced rental rates for city-owned facilities.
Government agencies can also develop healthy housing policies that can help employees live closer to work and not have to commute. Rent control and employee housing programs are just two examples. Cities can also invest in infrastructure to help support a more stable economy. Street paving and pavement rehabilitation projects make a huge difference to local companies. School districts can also have an impact on a community’s success.
Offering a high-quality education for children can help attract and retain a talented workforce. Making community improvements such as these isn’t just beneficial for those looking to relocate to a certain area, they also help retain current residents and dissuade them from moving elsewhere. An economy’s success entails much more than businesses, it’s an entire system of moving pieces that all work together.
A community’s economic success isn’t typically dependent on one single business. There are several different factors that comprise the economic makeup of a community. However, if a company is having a negative impact it should be honest with its stakeholders.
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Interesting related article: “What is Economic Development?”