Adapting to the Changing Economy

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I am interested in how the government assists communities when the economy changes. For instance, in the U.S., you can get disability simply because you cannot physically do the work that is available where you live, so disability is actually being used as welfare in economically depressed areas. I happen to live in one of those areas. Agriculture was the major industry. Then manufacturing. Now it is low-paying service jobs. There are plenty of people who can work but no high-paying jobs, very little demand for professional services. The able-bodied escape and the elderly and disabled stay, but disabled is a relative term.

If economics or government are one of your special interests, can you tell me what are some other actions the government takes to help communities (not just individuals) rebound after capitalism has left them high and dry? I am just now starting to realize that communities are temporary tools that people use to survive. For instance, look at the old west ghost town. It was only good when there was a mining boom, but everyone moved away after all the minerals were extracted. This is a natural part of capitalism, so I am assuming there are some sort of state or federal programs that are addressing this issue. If there are not, what do you think would be the best approach to helping people who live in threatened communities or regions of the country? What actions are ordinary citizens doing to adapt to the changing economy? The largest instance of this would be Detroit and the industrial Midwest.

Successful governments are working with private industries to reinvent their towns. They use smart regulations, tax incentives, and other tools to encourage businesses to come open offices there, thus employing people.

Look at the tax rates and regulatory levels in places that are collapsing (Detroit) compared to places that are thriving (West Virginia, Texas, Arizona)

The governments in those areas are driving themselves into unpayable debt, while refusing to acknowledge the fundamental problems.

The problem with tax incentives is that a company that will relocate for tax incentives is just as likely to relocate when a different city offers them better tax incentives. It is a temporary fix, at best. Cleveland has been luring in businesses left and right with their recent tax incentive programs. Many businesses can operate completely tax free for the next 10 years. Some of the first companies to come to northeast Ohio only got 3 years, and most of them have already left for better tax status elsewhere. All it really does is rob other communities of tax revenue until yours is robbed in turn. And give politicians some talking points: "We brought 15,000 jobs to Northern Ohio this year." But lost 30,000 to places with better/newer tax incentives.

It is a poor system for the public (but fantastic for business) in a capitalist society

Edward Glaesar once wrote about a comparison between Detroit and New York. Back in the 1970s, both cities were basketcases, but at least Detroit still had some powerful companies. No one wanted to be in New York in the 1970s, which was a symbol of urban decay. Fast forward today, and the picture is different. Detroit slid much further, whereas New York is unquestionably one of the most vibrant cities in the world.

Glaesar attributes this change to the size and magnitude of firms in each city. The automobile companies dominated Detroit, and so Detroit's fortunes were tied to those companies. For most of their history, those companies paid very high wages for jobs that did not need more than a high school degree, mostly because they were so productive. This dampened any incentive to innovate. New York, on the other hand, always had lots of small firms that were used to a highly competitive marketplace. When one died, another took its place.

We see that playing out all across the U.S. Former company towns are dying out, while cities with a multitude of firms are thriving. There are one or two cities still left that thrive on a dominant employer (DC comes to mind), but that is the exception.

That's actually proven to be false.

If a company is considering 4 locations for an expansion or relocation. All 4 are deemed acceptable. Tax incentives DO NOT get the locality on the list. The company looks beyond anything short-term to decide if they are willing to relocate there or not. The tax incentive might pull them in so that one of those 4 rises to the top, but none of them got on the list because of them.

More so, a company really isn't going to relocate because of a discontinuation of a tax incentive or failure to continue one. There's considerable cost in relocating any operation. Just moving across the street costs a significant amount of money. There has to be much more at stake. Even if you started an anti-business atmosphere in your community, businesses WILL NOT move away just because of that, but when something comes up, the will question why not make the move anyhow.

Examples:

Grocery store literally moved to a new store across the street. Land had to be renovated, new store built, etc. Why? Old store location has limited space, could not expand, was showing its age, whole complex was old and not attracting renters. They held out as long as they could before investing for the move. The benefits for moving had to vastly outweigh the cost of doing it.

Retail store threatens to move if not given tax concessions....truth is that their lease is up, corporate is prepared to pick a new location and build a modern store compared to the old, outdated one. If they get the tax concessions, they'll NOT do the move...for now, but they already have the will and capital to do it anyhow. They're blackmailing the community to get more money...nothing more, and they will do it anyhow once it isn't given to them.

It is not so much retail or grocery as administrative, legal, financial, etc. These are the companies most likely to move in for the tax incentives; the the types of offices that can relocate for a modest amount of money. Retail is not a business where tax considerations are going to be all that important, as the location is what makes the investment worth it.

Manufacturing no longer brings in a lot of jobs, and less every year due to constant improvements in machinery and computers. Warehousing and distribution could bring more jobs, but even now they are implementing computerized systems that can get the goods from their locations and sort them by customer. The biggest net in jobs these days are from corporate offices, which will relocate in a heartbeat if their data analysts say it will save them a few hundred thousand bucks.

Leases ending are usually the primary reason for retail store relocation, and they can be swayed by favored tax status, but in the long run, they will still move it if it lets them keep more of their money.

Thing is, not everyone can do service jobs. They require people skills.
Not only would it be very unpleasant for someone who lacks people skills, but it can be harmful to the business that hires someone with poor people skills in a service job.