State economic development leaders have embraced the need to report program outcomes to demonstrate the impact of their efforts but seek better indicators to measure those outcomes. A new paper from the Center for Regional Economic Competitiveness, Redefining Economic Development Performance Indicators for a Field in Transition, identifies a set of metrics beyond jobs and investment tallies to capture the broader benefits of economic development initiatives.
This effort reflects an ongoing transition within economic development as the field moves from a recession-driven emphasis on job creation via business attraction and retention to a focus on wealth generation and asset building, especially among communities that have not enjoyed the benefits of economic recovery. Accordingly, this paper examines metrics that capture a wider approach to economic development by focusing on indicators related to job quality/worker prosperity and business dynamics.
Job quality and worker prosperity
Economic development leaders seek indicators that recognize that all jobs are not equally beneficial to the economy and that many areas need better jobs, not more jobs. Job quality indicators tend to be:
- Wage related
- Benefits based
- Focused on skills development and career pathways
- Demographically or geographically targeted
Business dynamics indicators go beyond job creation or investment to measure business churn, innovation, productivity and global activity. Business dynamics indicator categories address:
- Business formation, growth and survival
- Next generation competitiveness
- Sector, demographic or geographic characteristics
Guidance for selecting indicators
The paper does not provide recommendations on which metrics economic developers should adopt because circumstances and strategies vary widely. Instead, it offers the following guidance on themes that indicators should address and ways states can adopt them effectively.
Connect metrics to program activity. Develop and document the logic model for each economic development program to articulate explicitly how inputs (investment or activity) are expected to translate into outcomes.
Consider adopting performance indicators that address job quality and business dynamics, where appropriate, such as:
- wage levels, benefits provided, occupations, and/or skill development and career pathways;
- business churn metrics in addition to year-over-year summary trends;
- indicators related to innovation, productivity, or global business activity among assisted businesses.
Report program-related outcomes as distinct from broader economic benchmark indicators.
Evaluate data source options, including the feasibility, quality, and availability of data when selecting indicators.
Determine which indicators can be used to understand economic inclusivity within the state’s overall economic development portfolio.
- capture relevant information about program impacts related to racial, ethnic or gender diversity and distress of the places where investments are made
- report data internally even if not required for external reporting
Create a communication plan to drive productive use (and accurate dissemination) of economic development program outcome data.
We invite you to read the full report, Redefining Economic Development Performance Indicators for a Field in Transition, which is available on the CREC website and can also be downloaded from Smart Incentives. This article is adapted from the paper’s Executive Summary. Ellen Harpel of Smart Incentives is pleased to have contributed to the report.