Impactful Industries – Local Economic Impact Edition
One of the questions I hear constantly has to do with the impact, or potential impact, of an industry on the local economy in Grand Forks. To be clear, there are no clear rules on which industries will have the highest impact. There are multiple factors influencing such outcomes, such as the supply chain factors in the local economy, the response of the consuming public, whether the business is in a “new” industry from the perspective of the local economic portfolio or will be competing with existing firms, and so on.
The single biggest impediment to large economic footprints for Grand Forks is the supply chain issue. Dollars quickly leave the area to buy necessary inputs to the production process, which means they are no longer circulating in the local economy buying goods and services here and paying local salaries and wages. This does not mean that firms do not contribute to the local economy unless they buy local. It is better to have a company that pays some local salaries than not. The issue at hand here are the claims of broader economic impacts that will transform the local/regional economy. Transforming an economy is difficult to do at best, and often involved painful adjustments as old jobs are lost in favor of new industries.
Which firms/industries will have the highest probability of creating these large impacts? If we are going to make the suggestion that there will be large-scale economic impacts as a result of a new firm or industry locating in the local area here are a few questions to ask yourself:
- Will they buy a significant amount of their inputs from local suppliers?
- Will they be supplying other local firms with goods/services used in their production processes?
- Will they generate significant direct employment effects?
There are no guarantees in life and economic impact. The answers to all these questions could be yes, but there is no large impact created or the answer could be no and a large impact created, though the latter is far less likely. These questions are a good start to thinking about economic impacts of industries and businesses.