Rethinking economic development in the post-Covid world

Rethinking Economic Development (photo: Edwin J. Torres/Mayor’s Office)

The COVID-19 pandemic has profoundly altered state economies. At this point, it is clear that some of the changes will last, with important implications for how governments should think about the future. State economic development agencies are tasked with building this future and they need new approaches to deal with these changes.

In January 2021, with the assistance of New York Empire State Development Corporation staff, we began a process of reviewing literature and research reports and interviewing experts across the country to develop a new approach to the economic development of the state in the post-pandemic environment.

The result is a report, published on June 16 and titled Strategies for Building Inclusive and Progressive State Economies in the Post-COVID Era which explains how the existing political tools of the state can be adapted, reoriented and improved to build a more equitable and prosperous society.

Our report focuses on three key imperatives that must inform a new approach to economic development.

Addressing Systemic Inequalities
The most important lesson from COVID-19 is that we need to do more to address the huge systemic inequalities that continue to plague our society. According to the CDCblack and Hispanic Americans were about three times more likely to be hospitalized and twice as likely to die from covid than white Americans.

At the same time, the economic impact of COVID-19 has been particularly harsh on people of color and low-income communities, in part because they are overrepresented in hardest-hit industries, such as food and the hotel industry.

Government policy, including the billions spent on economic development, can no longer be detached from the central goal of closing inequalities and tackling structural barriers to success. An estimation of the Institute of Economic Policy found that rising inequality has slowed U.S. economic growth in aggregate demand by two to four percentage points in recent years, with the share of income shifting from low-income, low-savings households to higher-income, low-savings households. higher savings. Addressing structural inequalities is not only a moral imperative, it is an economic imperative.

Embrace new working models
Covid has changed the number of people who work and live and these changes are proving to be lasting and not transitory. The state government must help lay the groundwork for new “hub and hub” working models that involve better, sustainable transit-based infrastructure.

In the past, jobs that required high levels of peer interaction were mostly located in dense urban centers and some of their employees traded higher housing costs and smaller spaces for shorter commutes. An infrastructure of in-person services – from restaurants and bars to shoe repair and dry cleaning stores – has grown up around the businesses. Employees of service companies often struggle to find affordable housing within a reasonable distance from their work.

In the post-covid world, many people who can do all or part of their work remotely will choose to live farther from the urban core. For example, the commuting center around New York will expand considerably – perhaps as much as 100 miles, encompassing all of Long Island, the Hudson River Valley almost to Albany, and much of the way to Binghamton.

Take advantage of increased federal spending
Policy levers at the federal and state level that were previously politically untenable or considered too costly — ranging from eviction moratoriums to economic stimulus — have been used.

The influx of federal funding, including the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES) Act passed in March 2020, the $1.9 trillion U.S. Bailout Act passed in March 2021 and the $1.2 trillion infrastructure bill passed in November 2021, will have long-term implications. These new funding streams, if used strategically and effectively, have the potential to have a lasting impact on state economies.

Based on these themes, our report offers a clear thesis for change over the next five years, focusing on five key areas and goals:

1. Economic development policy: Reorient state economic development tools to focus on data-driven strategic investments.

2. Workforce Development: Align workforce development investments with business needs and future employment opportunities.

3. Affordable Communities: Reimagine cities and new transportation hubs as affordable, sustainable communities where people can live and work.

4. Development of new business: Support business expansion and leverage universities to create new R&D ecosystems.

5. 21st Digital infrastructure of the century: Leading digital infrastructure to lay the foundation for economic growth in the 21st century.

The post-covid world poses new challenges to state economies. Without further action, remote work risks exacerbating already unacceptable economic inequalities. Existing neighborhoods, communities and transportation networks may be ill-suited to the new economic environment. State economic development agencies will be expected to respond, and if they do so using the tools of the past, they are unlikely to achieve the results needed in this unexpected future.

The good news is that there has been a wealth of research and an explosion of data that economic development agencies can use to improve and target their practices.

State economic policy has the tools to focus on projects that produce not only more jobs, but better jobs for disadvantaged communities, to leverage data that enables the promotion of effective workforce and infrastructure development, and to focus on building a fairer and more flexible workforce and economy. . It can and should shift from a focus on individual companies and projects to a strategy that emphasizes the development of human capital and infrastructure.

Our hope is that our report can serve as a model for states at a time when we have the potential to produce the most progressive economic change since the Great Depression.

Sherry Glied is Dean of the Robert F. Wagner Graduate School of Public Service at New York University. Carol Kellermann was chair of the Citizens Budget Committee from 2008 to 2018.

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