Economic Development Day in Today’s Papers

It’s football and economic development in today’s papers.

In the Richmond Times-Dispatch, Mark Warner’s record on economic development is reviewed by reporter Greg Edwards. Almost uniformly, local and state officials offer praise, especially for the outgoing Governor’s efforts in attracting businesses to Southside and Southwest.

Also in the T-D, Secretary of Commerce and Trade Michael J. Schewel is confirmed as leaving his post to return to private law practice. There had been conflicting reports about his plans. A new Secretary will probably be named this week by Governor-elect Kaine.

Sticking with the theme of economic development in Virginia’s less prosperous areas, Washington Post reporter Ellen McCarthy left the hustle and bustle of Metro DC for the wide-open spaces of Lebanon in Russell County, where CGI-AMS and Northrop Grumman will locate new high-tech facilities that are the crown jewels of the Warner record. Naturally, the locals are thrilled and the transformation potential is viewed as great.

Worthy of discusssion, however, is this snippet:

In fact, the tech companies that line the overflowing roads of Northern Virginia have thousands of open jobs they can’t fill. The job market in Washington is so tight, companies regularly pay bonuses and inflated salaries to recruit employees with technical skills, even though the work required to develop new software programs has become increasingly routine. Banks and insurance firms long ago cut their software development costs by shipping the work to India and China, but legal restrictions and the politics of government procurement have prevented federal contractors from following suit.

So they are looking at rural America instead — to places where rents are cheap, traffic is light and, instead of companies being forced to offer bonuses or poach employees from a competitor, rsums [sic] pour in by the dozen.

Are there issues with rural Virginia being America’s “India?”

The average salary for the 300 people CGI-AMS expects to hire in Lebanon, for instance, will be $50,000 — far above the town’s $27,606 average annual wage but about half the salary an advanced software developer in Northern Virginia might earn.

Given the apparently dire employment situation in NVA, shouldn’t we be seeing companies not involved in state contracting moving to less populated areas in Virginia?

The move of software developers and some other more routine jobs “will be a growing pattern,” said Anirban Basu, an economist and chief executive of the Sage Policy Group. “The Washington-area cost structure is pushing jobs out of the region.”

Or, are the CGI-AMS and Northrop Grumman deals essentially expensive “bones” thrown to make a particular deal?

Donna S. Morea, president of CGI-AMS, said the [state] contract had no bearing on the decision to locate in Lebanon. A $4.5 million incentive package put together by local and state officials, however, was taken into consideration, she said.

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5 responses to “Economic Development Day in Today’s Papers”

  1. Lucy Jones Avatar
    Lucy Jones

    the work required to develop new software programs has become increasingly routine
    The market is screaming for more innovation and evolving at an unimaginable rate. We are over the dot-com era, thank God, but companies are finding that technology is a very important part of business. Companies may wish this were true since the cost of technology is high but with this attitude, they would quickly find themselves unable to compete in the market.

    I can understand why no one would be taking the $50,000 jobs in NoVa. A family can’t live on that with the cost of living in that area.

    I hope Va. does become the “India” of the US. Outsourcing to other countries is killing the Tech careers here. Could they please throw some companies east of Richmond?!!!!

    the [state] contract had no bearing on the decision to locate in Lebanon

    Yeah right! I suppose the political donations were just tax write-offs too right?

  2. El Moderado Avatar
    El Moderado

    “Or, are the CGI-AMS and Northrop Grumman deals essentially expensive “bones” thrown to make a particular deal?”

    Economic Development, like many other things is a business and business is all about making “deals”. Job creation is a highly competitive environment where potential employers search and wait for the best “deal” to be presented by potential communities, i.e., economic development entities.

    You can’t have it both ways. Imagine the response if no incentives were provided to these companies and the jobs went to India anyway.

    How can someone who is in charge of economic development in any community be expected to be successful without throwing bones to potential employers?

    The jobs stayed in the U.S. and in The Commonwealth – it’s a win/win.

  3. Will Vehrs Avatar
    Will Vehrs

    The “bone” I was speaking of was the tying of a state contract with locating in a particular area, an incentive that made competitive local incentive packages possible.

    Your point is well-taken.

  4. Anonymous Avatar

    I left a well paying job at the Pentagon for another job 45 miles farther from the center. The move saved me $350/month in mass transit costs plus 50 hours a month. My pay raise for switching jobs was over 20%.

    It took my previous company 6 months to find a replacement for me. She lives in Richmond and commutes because she cannot afford to live in NOVA.

    That means my previous company was out the revenues from that job for six months. In addition they are paying for her hotel during the week while she attempts to find accomodations.

    No one can afford this nonsense. Not the employee, not the employer, not the government. It is no wonder people are desperate to get out.

  5. Anonymous Avatar

    Anon 8:09:

    Wow, I am not alone. I left the area after the tech bubble burst for the same reason. I felt I could never get ahead. Ironically, I landed in a real estate related industry and recently spoke with a person who has been in the area sine the 60’s.

    The individual made a fortune in real estate over the last 40 years or so and they have lived through several boom and bust cycles.

    Anyway, they are liquidating everything they own. They feel the fallout from the overheated real estate market in NOVA will be one of historic proportions.

    I guess we’ll see.

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