By Elliot D. Pollack | Arizona Capitol Times
I have been a practicing economist in Arizona since 1969. I started my career as an economist for the largest bank in the state at that time and finished my career as an economic consultant, advisor, and keynote speaker. I have been more than a casual observer and participant in the economic development process over the last 50 years. I have seen ideas and organizations, good and bad, come and go. I have seen good times and bad times in terms of how the state and its political subdivisions approached economic development. I have a good understanding of what works, what doesn’t, and why. With that experience, I can say without equivocation that the present set of economic development organizations led by the Arizona Commerce Authority (ACA) is by far and away the best and most successful I have observed over the last five decades.
The ACA is, by any standard, one of the best in the country. It was the brainchild of political and civic leaders who recognized the importance of creating quality jobs focused on high-tech and export-related industries. The quality and composition of the companies they have brought in over the past several years have improved the nature of the state’s economy, including the latest round of semiconductor giants, electric vehicle and battery manufacturers, and other high-value companies. While some might have chosen Arizona without assistance, many would not have without the services of the ACA and other such organizations. Over the last five years, the ACA has helped bring in more than 115,000 direct jobs (more than $94 billion in potential new investment) with average annual wages well exceeding the statewide average. Counting the proven multiplier effects, the total is nearly 240,000 jobs created. And that doesn’t include the tens of thousands of construction jobs generated per year nor does it consider any of ACA’s efforts working with local small businesses and entrepreneurs.
Virtually every successful economy is dependent on base industries which generate demand from outside the region. This includes manufacturing, business or consumer services, tourism-related businesses, or a post-secondary institution attracting out-of-state students. In each case, money is imported from outside the state, creating jobs and tax revenues locally. Those DIRECT jobs then create INDIRECT employment to provide goods and services such as legal, accounting, maintenance, etc.
Finally, INDUCED jobs are created by the spending of direct and indirect employees on items such as food, entertainment, housing, transportation, and medical services, just to mention a few. Those ripple effects occur throughout the region, and base industries create the highest multiplier effects. For example, last year a total of 2.1 jobs were created in the state for each base job brought in. And while the multiplier effects are considered secondary, they are no less as real as the base jobs.
It’s a competitive world out there. Marketing ourselves as an economic region, supplying relevant business information (and how to negotiate the myriad doors necessary for an outsider to understand the process), and providing a full understanding of our competitive picture, is a must. We compete with 49 other states and other countries throughout the world for jobs and industry. Many of our competitors have bigger economies and can provide significantly more resources. Fortunately, Arizona is now competing extremely well (even with much larger states), in large part due to professional organizations like the ACA. In fact, over the past 15 years, we have gone from being at the back of the pack to being near the top of the list when major companies look to expand or relocate.
Tax revenues generated by the companies that ACA and others have attracted are a large multiple of their recruiting cost. These new companies created almost $1 billion in tax revenues last year alone which allowed cities, towns, counties, and the state to afford services at levels that they would otherwise probably not have been able to offer. It is truly a win/win situation.
We must compete to bring businesses and jobs to the state to create more opportunity for the state’s residents, create a higher standard of living, grow demand for small and local businesses already here, and generally better the economic lives of the people of Arizona. We should not let politics hurt the economy of the state. It has taken years and an unbelievable amount of hard work by smart and dedicated people to overcome past political foibles that threatened our standard of living. We should not allow that to happen again.
Elliott Pollack is an economist who has practiced since 1969 and principal in the consulting firm he founded in 1986, Elliott D. Pollack and Company, in Scottsdale.
