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Virginia’s big bet on tech talent is working. Other regions are watching closely and taking notes.

By Pam Harder, Greg Wright

There is ample evidence that talent considerations have come to dominate the selection criteria of companies when deciding where to place job-creating business investments. For instance, “availability of skilled labor” has climbed to first on the list of factors companies care about most when making their site-selection decisions. This growing emphasis on talent has led to a much-needed reconsideration of local economic development strategy, which has traditionally focused on the provision of tax incentive packages that largely benefit a small set of firms. Research has found that these narrow tax incentives are largely ineffective at spurring local employment growth in part because they do little to attract new firms to the area. This stands in stark contrast to incentives that are directed at local skill development, which have been found to lead to far higher returns for communities. The good news is that policymakers have taken notice of these facts, leading to a shift toward economic development strategies that focus on investments in talent.

Virginia is an example of a state that took a big bet on a talent-forward approach to economic development. In 2018, the state launched an unprecedented, state-wide $1.1 billion performance-based Tech Talent Investment Program, which ultimately became the centerpiece of Virginia’s successful Amazon HQ2 bid.

Quote from an Amazon leader:

“We were particularly impressed by the dedication to higher education and the K-12 talent pipeline (in Virginia). The investments the local community and the state are going to make are really going to augment the great talent pipeline, which is a primary reason why we chose the Commonwealth for this new headquarters.”

– Holly Sullivan, Head of Worldwide Economic Development, Amazon. Source: Virginia EDO

The CEO and President of Virginia’s EDO at the time, Stephen Moret, led the charge in a close partnership with the President of the State Council of Higher Education for Virginia, Peter Blake. At the time, Virginia was taking a big gamble by shifting so markedly from the norm in economic development strategy.

Through Virginia’s Tech Talent Investment Program, more than a dozen higher education institutions across Virginia will collectively produce 32,000 graduates in computer science and related fields, more than doubling the number of grads each year.

Figure 1. Overview of Tech Talent Investment Program

fig 2

Source: Virginia EDO

As a result, hundreds of tech employers across Virginia will benefit from a more-skilled labor force, including but not limited to Amazon. This stands in contrast to the narrow benefits produced by cash and tax incentives for individual firms.

Now, three years into the most historic state-level investment in tech talent, how is Virginia’s big bet paying off? The answer: surprisingly well.

Now, three years into the most historic state-level investment in tech talent, how is Virginia’s big bet paying off? The answer: surprisingly well. The Tech Talent Investment Program just finished its third year out of its 20-year lifespan, and already results are strong. Cumulatively, the 14 participating four-year public institutions in Virginia, plus two masters-level institutions, plus Virginia’s community college system have graduated over 7,400 eligible Tech Talent Investment Program grads in just the first three years. This is ahead of plan, despite COVID disruptions to higher education enrollment and retention. And in terms of net new degree production the state is at 148 percent of planned levels. These graduates are fueling a diverse and growing ecosystem of tech companies that are increasingly choosing Virginia as their home base. Boeing’s recent announcement to relocate its global HQ to Virginia is just the latest of many.

Figure 2. Illustrative examples of tech headquarters and centers in Virginia

fig 3

Source: Virginia EDO

Other states and regions are watching Virginia—and taking notes. With this in mind, the Workforce of the Future initiative at Brookings has developed a tool–the Smart Growth Strategies tool–that can help regional policymakers identify the investments in talent that are most likely to pay off for their region as a whole. The tool first guides policymakers toward industries that are locally underdeveloped but are highly complementary to existing local capabilities. Next, the tool characterizes those industries according to their potential for growing a skilled, well-paid workforce. Finally, the tool provides a detailed description of the additional talent that a local area would need to develop in order to attract, and scale up, those industries.

It’s time to promote regional economic development strategies that move away from zero-sum, incentive-based business attraction and, instead, foster innovative investments in people, in education and training systems, and in resources that will benefit the economy as a whole. Virginia’s Tech Talent Investment Program is hopefully just the first of many talent-forward investment strategies that we’ll see in the years to come.

The Brookings Institution is a nonprofit organization devoted to independent research and policy solutions. Its mission is to conduct high-quality, independent research and, based on that research, to provide innovative, practical recommendations for policymakers and the public. The conclusions and recommendations of any Brookings publication are solely those of its author(s), and do not reflect the views of the Institution, its management, or its other scholars.

Amazon is a donor to the Brookings Institution.

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