Is tech really the right bet for Anytown USA?

By Francisco Dao , written on October 10, 2013

From The News Desk

These days just about every place is trying to create its own Silicon Valley. Everyone is so completely sold on technology as the savior of the economy, we now have Silicon Canal, Silicon Slopes, Silicon Sandbar, four Silicon Beaches, three Silicon Prairies, and a dozen other Silicon named areas just in the United States. Overseas we have Silicon Glen, Silicon Fen, Silicon Wadi, Silicon Welly, and the list goes on.

But is this focus on tech really the smart move for local economies? Or are they chasing a mirage?

Imagine you’re the mayor of Anytown USA, a mid-sized city whose industrial manufacturing base has been in steady decline. Unemployment is above the national average and only 24 percent of the population has a bachelor’s degree or higher (for reference 50 percent of people in San Francisco have a degree). Would you be better off trying to attract a Google office or an ACDelco auto parts plant? Most of the people reading this probably think the Google office is a no-brainer, but I’m not so sure.

If you step away from the positive press of bringing Google to Anytown USA and really think about the impact it would have, most cities would, at least in the short to mid-term, be better off with the blue collar factory.

Consider the raw numbers of who benefits directly with a job. Obviously these are made up figures but they’re probably not unreasonable. Let’s say 15 percent of the population of your average American city meets Google’s hiring standards while 60 percent qualify for a job at ACDelco. Based on minimum qualifications, the “old economy” factory provides a possible employment opportunity to a much greater percentage of the population.

But factory jobs are crappy and Google pays better.

At the risk of offending factory workers, let’s say that’s true on both counts. But if you’re unemployed or working at Taco Bell, a factory job sounds pretty damn good and since 85 percent of the local population isn’t even qualified to work at the Google office, unless you’re one of the very few lucky ones, who cares what they pay.

The trickle down effect will help the community.

Sure, money spent in the community gets spread around but let’s look at some more hypothetical numbers. Let’s say Google’s plan is to bring on 70 white collar employees at an average annual salary of $140,000 and 70 support staff at an average annual salary of $45,000. ACDelco plans on hiring 40 white collar workers at an average of $100,000, 200 line workers at $45,000, and 70 support staff at $35,000. Not only would the ACDelco plant pay $2.5 million more per year in salaries, but equally important the money would be spread out more evenly across a wider swath of the population.

Again, this is a completely fabricated scenario but even if the imaginary ACDelco plant didn’t come out ahead in total payroll, the fact that it employs a higher total headcount and therefore spreads the wealth across a wider base should be a consideration when thinking about which option provides the greatest overall benefit to the city.

I’m aware of both the right and the left ideology on markets, but remember, the exercise is to imagine yourself as the mayor of this town. You have to face these people on the street and your job is to do what’s best for the community, or at least what gets you re-elected. Does wooing the fictional Google office in an effort to call your city the new Silicon Anytown still look like the best option?

Most cities make an effort to attract tech companies as a way to set cornerstones for a growing industry. On this count, the Google office wins hands down over the ACDelco factory. But very few cities have actually been able to grow a significant tech sector and none have come anywhere close to creating the next Silicon Valley. In most places, it’s a lot of branding and effort for a relatively small number of jobs. The bet on technology is one being placed for the future.

Lastly, I know the decisions are not necessarily either/or. A smart mayor would try to get both the Google office and the ACDelco factory. The purpose of this exercise is just to show that tech is not necessarily the economy saving job machine everyone thinks it is. It’s probably the right bet in the long term, but many of these cities are looking at a decade or more to establish a tech industry while they have unemployed people who need jobs now.

If you were the mayor of Anytown USA, what would you do?

[Illustration by Hallie Bateman for Pandodaily]