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YOU DECIDE: What are the challenges facing North Carolina's counties

August 08, 2008

MEDIA CONTACT: Dr. Mike Walden, 919.515.4671 or michael_walden@ncsu.edu

Dr. Mike Walden
Media representatives: For a black-and-white or color copy of this photo, call 919.513.3127 or e-mail dave_caldwell@ncsu.edu.

Later this month, I will be honored to speak at the annual meeting of the North Carolina Association of County Commissioners.

Founded 100 years ago, this group represents the level of government in North Carolina that, along with municipalities, is closest to households and businesses. Among their more important duties, county governments provide local funds for public schools, operate public assistance programs and provide law enforcement through the courts system and sheriff's office.

Counties are also involved in economic development, and it is on this responsibility that I will focus my comments.

What is clearly evident when the 100 counties of North Carolina are compared is that their economic performance has varied. On one side, North Carolina has some of the fastest-growing counties in the country, including counties attracting the very highest-paying jobs. But on the other side, our state has many counties struggling to keep jobs.

Here's a preview of the key points I will make to the commissioners about where our counties are now, how they got there and what can shape and change counties in the future.

North Carolina's counties are growing further apart. Just as there's been a recent trend of growing income inequality in the nation, so has there been among our counties. Richer North Carolina counties have grown faster and richer than poorer North Carolina counties. This has created a wider income gap between our state's have and have not counties.

Economic forces impacted North Carolina's counties differently. Big forces shaped the economy during the last three decades: globalization brought about by advances in communication and transportation technology; enhanced competition created by deregulation of major industries and the reduction in world trade barriers; increasing benefits to workers from more education; and the development of the service economy.

While these forces have been pervasive, they have affected counties in different ways. Counties with more college graduates, with "new economy" industries like technology, finance and health care, and with strong ties to export markets, have thrived in the new economic world. Conversely, counties lacking workers with advanced degrees and with an economic base tied to industries that have lost sales to international competitors have not done well.

The most important driving economic force is education. Research that I and others have done both for North Carolina and for other states confirms that, among all the forces shaping our economy, education stands out as the most important. Simply put, both people and places that have invested in education have done well in the modern world, while others have not. Education, or the lack of it, is the key factor causing the increased income inequality among both workers and counties.

Economic development can be people-based or place-based. Improving the economy of a county can take two tracks. The first is to focus on improving the skills of the workers in the county by upgrading their education and training. The expectation is that well-paying new economy jobs will be attracted to a qualified workforce. The downside of this people approach is that workers can take their new skills and leave the county in pursuit of jobs elsewhere.

The alternative is place-based economic development, which focuses on investments in the county that can't be moved, like roads, water and sewer, airport development and energy resources. Studies have shown a positive impact from these investments, particularly from roads and airports. Still, the research suggests a place-based focus can't alone ensure economic development. A qualified, skilled workforce must also be available.

A composite strategy appears to work best. The largest single category of state and local public expenditures in North Carolina is education. Therefore, it can be argued the people-based approach is the major thrust of economic development in our state. However, substantial place-based spending comes from transportation, energy and water and sewer projects.

In recent years our state and local governments have used another place-based strategy to tie economic development to a particular location: business incentives. In this case, a new business receives a reduction in their taxes if they agree to locate in a particular county and create a certain number of jobs. While controversial, the tactic can move jobs to where they're most needed.

Some say local government is where the action is in today's economy. I'm hopeful my comments will put a perspective on this action, but you decide!

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Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University's College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The Department of Communication Services provides his You Decide column every two weeks. Earlier You Decide columns are at http://www.cals.ncsu.edu/agcomm/writing/walden/decide.htm

Related audio files are at http://www.ncsu.edu/waldenradio/

Posted by Dave at August 8, 2008 08:45 AM