Brains are the most valuable resource in the 21st century. Skilled individuals with higher levels of educational attainment have more economic opportunities and they are the most mobile members of our society. Where they go, stronger economic growth follows.
Economists have documented the tendency of individuals and families to sort themselves among communities according to their preference for local services and amenities, and their ability or willingness to pay for them. The need to rein in rising expenditures and the downshifting of costs to lower levels of government will challenge the ability of many communities to provide a level of services and amenities attractive to the skilled individuals and their families so critical to the future prosperity of NH's cities.
New Hampshire's strong economic performance compared to other states is, in large part, the result of an influx of talented, well educated individuals and families into our state. Drawn to the Granite State's lower housing costs, variety of safe, desirable communities offering different levels of services and amenities (at a tax price that offers real value compared to nearby states), many who moved to NH initially kept their jobs in neighboring states. Eventually the agglomeration of talent in NH reached critical mass, creating a labor force with a concentration of educated and skilled individuals that, combined with NH's other advantages, make it an attractive state to start, move, or expand increasingly innovative and well-paying businesses.
Without desirable communities, NH would attract fewer individuals and families, so it is important for local officials and state policymakers to understand why skilled, educated individuals select some communities over others.
It is tempting to suggest that most simply chose to live where there were jobs available, but they didn't, at least not initially. Many commuted longer distances in exchange for living in communities that best matched their preferences for services, amenities, and affordability. But the growth in skilled and educated residents was leveraged by many cities into an expanded economic and employment base. During the past two decades, there has been a strong relationship between the employment and wage growth in NH's cities, and the concentration or growth in the number of residents with postsecondary degrees.
How individual cities respond to the challenges of rising costs, declining tax bases, and resident concerns over taxes will, in large part, determine the trajectory of their demographic and economic performance in the coming decades. It is especially important for the future of NH's largest cities to effectively manage fiscal challenges. Larger cities must compensate for the tendency of people to prefer smaller, less densely populated cities with fewer urban "problems." They do so by relying on a richer mix of cultural, recreational, and social amenities, and a broader array of services to retain and attract the skilled and educated individuals that increasingly drive economic growth.
A highly charged political environment risks pushing NH's cities to extremes in addressing fiscal challenges. New Hampshire's great strength is its broad middle class. Our state has a much smaller percentage of lower-income households and a slightly higher percentage of upper-income households than the national average (but lower than Massachusetts or Connecticut). New Hampshire is less a "haven for the rich" than it is a Mecca for the middle class. Increasingly the middle class consists of the two wage-earner, married couple families, exactly the demographic that characterizes the core demographic of those moving into NH. Whether NH can remain a Mecca for the middle class if communities increasingly become polarized in how they deal with fiscal stresses is an important question for policymakers.
There will always be communities in NH where the costs of local services and the resulting housing and tax prices are of less concern to residents. These "nothing is too good for us" communities generally have prosperous residents, but their price puts them out of reach for most choosing a community in NH. At the other extreme, data over many decades suggest that communities (and especially cities) that severely limit the type and quality of services and amenities they offer also have a narrow appeal and they generally have experienced lower levels of economic growth over time. It's an important caveat for communities contemplating a "slash and burn" approach to managing fiscal stresses.
Over time, "nothing is too good for us" and "slash and burn" communities tend to become increasingly homogenous, with less diversity of income and demographics and less welcoming of a broader spectrum of views on fiscal and political issues. But communities that can offer services that are desired by skilled, well-educated individuals, at prices lower than "nothing is to good for us" communities (albeit with fewer services or amenities) have always been a magnet for the kind of demographic that will fuel economic prosperity in the coming decades. These communities offer the most "value" in terms of the level of services and amenities for the housing and tax prices paid by residents. Offering value is the most important and difficult task confronting today's local government officials, but it is also the task with the potential for the greatest long-term rewards for NH. n
Brian Gottlob is principal of PolEcon Research in Dover and has worked 18 years analyzing economic, demographic, labor market, industry, and public policy trends. He can be reached at bgottlob@poleconresearch.com or 603-749-4677.