About economic development

Economic development is both a process and a practice. The process refers to how our greater economy generally works through the movement of people and money, and everyday transactions happening between businesses, government, consumers, etc. Some local and regional economies are humming along and doing well. Others are not. The practice of economic development refers to the role we play as leaders, both elected and otherwise, in positively impacting the greater process. What plans and policies, relationships, and initiatives are we employing to positively affect the process of economic development?

Last month we discussed the regional nature of economic impact, where the impact of a project, whether it be a new, existing or lost employer or activity, is realized to a great degree where its workers live and not necessarily where they work. Every day, employees take their paychecks home with them and spend their money in locations well beyond where they work. This is the ultimate measure of regionalism from an economic development process point of view.

Just as a river’s “watershed” represents from which geography it receives its water supply, where workers come from to work at an employment destination is termed a labor market, or “laborshed”. This article examines community laborsheds, and the benefits of understanding the data around our labor markets.

Characteristics of a Laborshed Analysis

By definition, laborshed analysis: 1) calculates the area from which an employment center draws its workers; 2) identifies geographic distribution of the workforce by concentration and location; and 3) examines the socio-economic characteristics of the identified employment base and population.

By its very nature, laborshed analysis identifies the maximum distance that workers are willing to commute on a daily basis. Not all employers are the same and laborshed size can vary based on different factors, including the type of jobs held, pay rate and benefits offered, quality of transportation networks, proximity to competing employment centers, and other factors such as cost of fuel.

As such, laborshed analysis is an effective tool in supporting existing employer retention and new business site selection, as well as regional economic impact assessments and other tactics. In particular, those who utilize laborshed information most frequently include (but are not limited to):

• Existing companies and other employers

• Prospective companies

• Site location consultants

• Community leaders

• Regional and state economic development and planning organizations

• Local and state policy-makers

As noted above, Chamber Fayetteville utilizes laborsheds to assess regional economic impact from employment either in Fayetteville or across any of our partner HAMMRC communities. As we all know, an economic development “win” in any of our communities positively impacts our other communities through the movement of workers and their money.

Calculating a Laborshed

There are several ways to calculate a community (or employer) laborshed. The most common, and least intrusive, approach is by simply identifying the number of employees by home zip code, whether through data provided by the Census or from direct surveying of employers. The most basic benefits of this measure are that findings do not involve any personal characteristics of anyone and that results can be analyzed quickly.

Assessing the concentration of employment, analysts gather employment by zip code, rank-order results, and map them by concentration. Once a geography is established, analysts can place findings into a Geographic Information Systems (GIS) computer program platform and study the demographics of the area, characteristics of the workforce, and other important measures.

Of course, just conducting the analysis does little to benefit existing and prospective businesses or economic development initiatives. How the results are applied at the local level and analyzed at all levels will be the real benefit.

Where do I get help?

Laborshed analysis is critical to successful business retention and development in our communities. A comprehensive laborshed analysis requires basic modeling and specific data. Some economic development organizations will conduct laborshed analysis, but many outsource to third party providers (consultants, universities, etc.) to do this work. This is a service we offer, partnering with HAMMRC members, at no cost. For more information on how we can assist you with laborshed assessments, please contact our office.