Published on Mar 1, 2015
According to MIT, mid-size companies — that’s businesses with 10 to 99 employees — generate 35% of jobs nationally. And these companies are better at creating middle class jobs in high-skilled areas. But, as Simon Thompson reports, New Mexico economic initiatives are NOT focused on supporting the growth of these companies.
New Mexico has been one of the states slowest to bounce back from the recession. That could be because the state’s primary approach to economic growth has been using incentives and tax exemptions to lure big business. NMSU economist, Dr. Chris Erickson, says the state is moving in the wrong direction.
“Economic development is an ocean liner and you are steering the ocean liner and right now Las Cruces and New Mexico is generally I think is steering towards the rocks because we are focused on developing short-term solutions on getting quick fixes when we need to steer the ship back into the channel – where we focus on what creates real economic development.”
Erickson says states that have had stronger trajectories of growth like Oregon and Colorado have taken a different, grow from within approach — known as economic gardening. Instead of giving incentives to out-of-state businesses, assistance is geared to help local firms. The states also enhance infrastructure to make the region a more attractive place to live and do business.
“Grow within type of policies which are aimed at helping businesses to grow then you have another set of policies that involve developing amenities — parks, recreation, that kind of thing, which let’s face it people like to live places where it is pleasant; they like to live near parks, they like to live near recreational activities, and if you have those available in your community and you can promote them and develop them – then that can result in attracting businesses into your community.”
There are regional examples of this approach — like the Organ Mountains Desert Peaks national monument designation, street improvements and a future plaza in downtown Las Cruces, and state assistance programs like Individual Development Accounts. The program provides eligible New Mexicans with training and a state matched savings account to help them pay for education, buy their first home, or start a business. Jessica MacKenzie is the owner-manager of Bella Luca — an Italian restaurant in Truth or Consequences. She took part in the program 8 years ago as she was establishing the business.
“When you are opening a small business every little bit helps so — it was worthwhile for us to do the classes and go to the program and have the little couple of extra grand to help us make the dream a reality.”
MacKenzie saved one thousand dollars and received four times that — $4000 — from the state. MacKenzie says she would have saved more if she could have, but the one-time matched saving program is capped at $4,000. So MacKenzie got most of the half million dollars it cost to set up the business from investments and loans.
“I don’t think there are many businesses that start for $5000 and I think the types of businesses that could open for just the $5 grand — if that was one was limited to as their opening budget — I don’t think there would be businesses with the staying power of, for example, my business – based on the fact that I obviously I did have a lot of other investment money to start my own business. So yeah, I can only imagine if a young family were only able to get $50,000, or you know something really could approach opening a real viable long term business.“
If this one-time individual development account for New Mexican businesses seems measly, that’s because it is when compared with the 25 to 30 percent reimbursement for film and television production. New Mexico has set aside $50 million a year for the film industry — but only $100,000 will fund this year’s Individual Development Account program.
Erickson says even though the film incentives and other perks for businesses are not always rational economically — they may make sense politically, especially in the lead up to elections.