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There is considerable evidence that talent considerations have come to dominate companies’ selection criteria when deciding where to place job-creating business investments. For example, “availability of skilled labor” is at the top of the list of factors that companies are most concerned about when making their site selection. This emphasis on talent has led to a critical reexamination of local economic development strategies, which have traditionally focused on providing tax incentive packages that benefit small firms. Studies have shown that these narrow tax incentives are largely ineffective in stimulating local employment growth because they do little to attract new companies to the area. This is in stark contrast to incentives for local skills development, which generate far greater income for communities. The good news is that policymakers are keeping these facts in mind and shifting their economic development strategies toward investments in talent.
Virginia is an example of a state that has taken a big bet on a talent-forward approach to economic development. In the year In 2018, the state launched an unprecedented $1.1 billion performance-based tech talent investment program, which ultimately became central to Virginia’s successful Amazon HQ2 bid.
From an Amazon leader:
“We were particularly impressed by the commitment to higher education and the K-12 talent pipeline (in Virginia). The investments the local community and the state are making will strengthen the great talent pipeline, which is a key reason we chose the Commonwealth for our new headquarters.”
– Holly Sullivan, Head of Global Economic Development, Amazon. Source: Virginia E.D.O
At the time, CEO and President of Virginia EDO; Stephen MoretIn close partnership with the president of the Virginia Council on Higher Education, who leads the charge; Peter Blake. At the time, Virginia was taking a big gamble by deviating from the norm in its economic development strategy.
Through the Virginia Tech Talent Investment Program, more than a dozen institutions of higher education across Virginia produce 32,000 graduates in computer science and related fields, doubling the number of graduates each year.
Figure 1. Overview of the Tech Talent Investment Program
Source: Virginia or
As a result, hundreds of tech employers in Virginia will benefit not only from Amazon, but from a skilled workforce. This is in contrast to the narrow benefits generated by cash and tax incentives for individual firms.
Now, three years after the most historic state-level investment in tech talent, how is Virginia’s big bet paying off? The answer is: it’s surprising.
Now, three years after the most historic state-level investment in tech talent, how is Virginia’s big bet paying off? The answer is: it’s surprising. The Tech Talent Investment Program has completed the third year of its 20-year lifespan, and the results are strong. In total, the 14 participating four-year public institutions in Virginia, plus two master’s-level institutions, and the Virginia Community College System have graduated more than 7,400 eligible Tech Talent Investment Program candidates in the first three years. This is ahead of schedule despite the Covid disruption to higher education enrollment and retention. And in terms of net new degree production, the state is at 148 percent of projected levels. These graduates are fueling a diverse and growing ecosystem of tech companies that are increasingly choosing Virginia as their home. Boeing’s recent announcement to move its global headquarters to Virginia is the latest of many.
Figure 2. Examples of technology headquarters and centers in Virginia
Source: Virginia or
Other states and territories are watching Virginia — and taking note. With this in mind, the Future Workforce Initiative at Brookings has developed a tool – the Smart Growth Strategies Toolkit – to help state policymakers identify skills investments that can pay off for their region as a whole. The tool first directs policy makers to industries that have not grown locally but are highly supportive of existing local capabilities. The tool then identifies those industries based on their potential to produce a skilled and well-paid workforce. Finally, the tool provides a detailed description of the additional skills the local area needs to develop to attract and grow those industries.
It is time to move away from zero-sum, incentive-based business incentives and instead promote regional economic development strategies that encourage new investments in people, education and training systems, and resources that benefit the economy as a whole. The Virginia Tech Talent Investment Program is the first of many talent-forward investment strategies we’ll see in the coming years.
The Brookings Institution is a nonprofit organization dedicated to independent research and policy solutions. Its mission is to conduct high-quality independent research and provide new, actionable recommendations to policymakers and the public based on that research. The conclusions and recommendations of any Brookings publication are solely those of the author(s), and do not necessarily reflect the views of the institution, its management, or other academics.
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