An important part of the economic development practice is improving quality of life. The International Economic Development Council (IEDC) defines economic development as “a program, group of policies, or activity that seeks to improve the economic well-being and quality of life for a community, by creating and/or retaining jobs that facilitate growth and provide a stable tax base.”
Business activity creates jobs, which means income, which creates wealth, which raises the quality of life, which attracts more business activity and so on and so forth in a virtuous economic development cycle. Dr. Mike Wilkerson, of ECONorthwest, and Andy Struckhoff, of PGAV Planners, explored the notion of the value the quality of a place has with respect to economic development.
So much of the economic development practice focuses on lowering taxes and reducing business costs in order to increase business activity. But is there a positive correlation between lower taxes and higher economic growth? A review of economic growth alongside tax rates indicates that lower taxation does not necessarily correlate positively with economic growth. In fact, during the last 40 years, as the top marginal income tax rate nationwide grew from 33.3% to 35%, the rate of real GDP growth increased.
At a local level, we can look to areas of high taxation compared to areas of relatively lower taxation and review growth in GDP. In such communities as Portland, Oregon; San Francisco, California; and Seattle, Washington, local economies have grown more quickly than other communities such as Cincinnati, Ohio or Denver, Colorado, which have comparably lower tax rates. There are many reasons why some local economies are healthier than others. One major reason is “quality of life,” or, in other words, the characteristics of a place that make it an attractive place in which to live and raise a family.
Place value was measured quantitatively by David Albouy in his paper, “Are Big Cities Bad Places to Live?”. In this paper, Albouy quantified the amount of income workers are willing to pay for natural amenities: 4% for less heat, 4% for less cold weather, 3% for more sun, 3% for nearby mountains, and 2% for proximity to the coast. Clearly, workers find value in these natural amenities and are willing to accept lesser income in exchange for the characteristics that enhance their quality of life. In this sense, a place has a direct value.
Many workers will select a location over a job; they will select a location that provides the quality of life they desire over a job or higher salary. Certain places create more demand for real estate and higher real estate values as well. Proximity to parks, walkability, retail density, education quality, and proximity to a central business district are all qualities that will create higher demand over places that lack, or are farther away from, these “quality of life” amenities.
In economic development practice, focusing on placemaking can lead to job growth. Likewise,
focusing on job growth can fuel placemaking.
Where economic development leaders focus their efforts depends on their community’s comparative strengths and weaknesses – where they and their fellow stakeholders determine they need to focus their efforts to yield the greatest return on investment.
One might argue that placemaking is a long-term effort that lays the groundwork for long-term job growth and business development or attraction. However, while engaged in such a long-term strategy, perhaps a community must also focus on business retention, attraction, and expansion efforts so as to nurture and grow the community’s job base.