For years, Missouri and Kansas used tax incentives to lure businesses across their shared state line in an economic development “border war.”
In the past few months, the governors of both states have signed pacts to end that practice, and the local agreement recently garnered praise from a prominent national think tank.
In an analysis piece acknowledging the efforts of Missouri Gov. Mike Parson and Kansas Gov. Laura Kelly, the Brookings Institution’s Amy Liu said the “historic handshake” should mark the beginning, and not the end, of economic collaboration between the two states.
“The opportunity is now there for both states to put the unbalanced tax abatements and hollow business relocations in the past,” wrote Liu, vice president and director of the Metropolitan Policy Program at Brookings. “They need to move forward vigorously by focusing on building homegrown talent, enriching education opportunities, and ensuring that each state’s workforce can access quality transportation and housing.”
Missouri and Kansas should focus on “growing from within” to confront structural challenges that face their economies, Liu wrote. The vast majority of state job growth comes from the expansion of homegrown businesses and startups, not from the relocation of businesses, she wrote.
Liu said economic incentives are the wrong tool for helping local economies at a time when many mid-sized Midwestern cities lack the “critical mass of knowledge assets” like applied research and development capability and specialty skilled workers.
“We are in the midst of a winner-take-most economy where superstar cities like San Francisco, San Jose, Austin, and Boston are capturing an ever-growing share of the nation’s innovation jobs and talent,” Liu wrote.
Lastly, Liu wrote, local leaders should focus on challenges like job automation, rather than on poaching existing jobs. Automation puts both Missouri and Kansas at risk, she wrote, noting that a quarter of jobs in the two states are at “high-risk” of automation, according to a Brookings study.
“Leaders must embrace a vision of regional economic development that is comprehensive in scope, collaborative in spirit, and inclusive, improving incomes and employment for everyone, no matter their race or zip code,” she wrote.