Strength Test #5: If your largest employer left town, would your city survive?

This article is part of a series on the Strong Towns Strength Test, a simple method to help determine your town's strength and resilience. This series offers step-by-step guides for giving your town the test along with ideas for actions you can take to help your town grow stronger.  We'll publish one article in this series every couple weeks. You can read all our previous Strength Test guides here.

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The question we're exploring today is #5 on the Strong Towns Strength Test: 

“If your largest employer left town, are you confident the city would survive?”

The purpose of this question is to help uncover how fragile your local economy is. If you’re relying on one company or government entity to employ a large percentage of your working population and to fuel your economic growth, you’re operating in a fragile world. A shift in consumer preference, national or state policy, and even international relations can shatter that industry in weeks. Look at Detroit. Look at San Bernadino. On a smaller scale, think of the once-thriving industrial and tourism-based towns that are now derelict and emptying out.

And don’t think you’re off the hook just because you don’t have a single employer who dominates. Many towns and cities have a single industry that drives the economy and, as we’ve seen in situations like the housing market crash of 2008, those ripples can impact whole sectors of an economy (i.e. it wasn’t just one construction company that lost business when the demand for new homes evaporated, it was hundreds).

This question on the Strong Towns Strength Test will give you a good idea of the fragility of your economy and help you think about ways to make it more antifragile.

HOW TO TAKE THE TEST

This is one of the simplest questions on the Strength Test so you should be able to complete it quickly.

1.   Look up stats on largest employers. A simple Google search should be able to tell you about your city’s top 10 or 20 employers. Make a note of which companies show up on that list and what industries they’re in (for example, the top 3 employers in my city are all healthcare-related). Pay attention to how the list is categorized. For example, I found several lists for my city (Milwaukee, WI) but most were only accounting for private companies, not government agencies. You may need to do a separate search to find stats on your municipal government employee numbers (and don’t forget to search for county and state government information too).

2.   Compare these stats to your city’s overall population. Make sure to account for surrounding suburbs if those are also incorporated in the largest employer statistics (vs. only employers strictly operating within city limits). ). For instance, my city’s single largest employer (a healthcare company) employs about 3% of the total working age population of our metro area.

3.    Look at industries in addition to individual companies. For example, having 3% of our working age population employed by one healthcare company isn’t terribly risky. While it’s still a large number for a midsize city, one can imagine that 3% being able to find other jobs if the company went out of business, especially given that healthcare skills are in high demand across the nation. But factoring in all the healthcare-related companies in my area shows that they’re employing more than 7% of our working age population. If 7% of our population lost their jobs due to a sudden decrease in healthcare funding, needs, etc. we’d be in pretty big trouble.

4.    Think about whether the jobs skills needed for these companies could apply elsewhere. For instance, a nurse who loses his job at a hospital might still be able to find work at a nursing home or school. A janitor who loses her job at a medical clinic could probably find another janitorial job. But a construction worker who is out of work when a major construction firm goes bankrupt may have a harder time finding new employment, especially if the whole construction industry is flagging. Similarly a fisherman would probably struggle to find a new job if the fishing industry collapsed.

A thriving local grocery store. (Photo by Johnny Sanphillppo)

NEXT STEPS

One of Strong Towns’ core principles is “Job creation and economic growth are the results of a healthy local economy, not substitutes for one.” If you’re looking at your town’s employment information and recognizing you’re in a fragile state, the solution is not to get a big government grant or start a new jobs program. Rather, the way to begin addressing this problem is to create an environment where new businesses can grow and thrive.

I put together a list of ways to encourage entrepreneurship last summer. You can read the full list here. It includes ideas like decreasing regulations that are overly burdensome and unnecessary for small business owners, facilitating walkable business districts, funding economic gardening programs, and offering business development classes.

TOWNS WITH DIVERSIFIED ECONOMIES

Large cities tend to have an easier time answering "yes" to this Strength Test question because their sheer size means they're likely to have many businesses keeping them going.

For instance, with the 7th largest metropolitan economy in the United States, Philadelphia has a healthy mix of government, education, and healthcare as its major industries. Manufacturing, tourism and telecommunications also rank high in its list of biggest industries. Houston also has a fairly diversified economy with prominent sectors including oil, healthcare, grocery stores and other food-related businesses.

While small towns often experience greater challenges in achieving diversified economies, there are some shining examples of small towns that can answer a sincere "yes" to this Strength Test question. The small city of Burlington, VT has an economy that relies on a mix of healthcare, tourism, education and technology. The town of Grand Marais, MN, while a large share of its economic activity is related to tourism, is also home to several educational and arts-based organizations, which makes it a surprisingly diversified local economy for such a small town.

Now that you've got the information on how to conduct this test, we want to hear how it goes.

Let us know your town's answer to this Strength Test question in the comments, by sharing your photos on social media with the hashtag #StrengthTest, or by emailing us.

(All photos from Unsplash unless otherwise noted)

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