Hiring Local Supports Local Businesses, Combats Labor Shortages, and Spurs Local Tax Revenue

Chicago, IL: Awarding public works projects to local businesses who employ area residents boosts economic development, promotes training opportunities for young residents, and spurs tax revenues for local communities—according to a recent Springfield, Missouri case study conducted by the Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana-Champaign and the Midwest Economic Policy Institute (MEPI).

Read the study, An Economic Impact Analysis of Hiring Local in Springfield, Missouri here.

A local business preference program was proposed to support small businesses and increase municipal tax revenues in the City of Springfield, Missouri. The ordinance would amend the Springfield City Code to provide an 8% bid credit to law-abiding local businesses bidding on City-funded public works projects. Local businesses would be classified as those who occupy permanent office space or construction yards within city limits where at least 50% of their employees work for at least 60% of their annual hours or where at least 50 full-time employees work. Coverage of the ordinance would apply to public works projects valued over $75,000. Subcontractors would also be covered.

“The City of Springfield plans to invest nearly half of billion dollars on infrastructure improvements over the next five years,” said MEPI Executive Director and study coauthor Frank Manzo IV. “The proposed ordinance would increase the chances that these street, bicycle, sewer, stormwater, and other important public projects will be performed by local businesses employing local construction workers.”

In their study, PMCR and MEPI researchers first show how the local business preference program could impact an average street improvement project in the city before calculating the overall value of awarding taxpayer-funded projects to local contractors who employ local workers. Using IMPLAN, an industry-standard economic modeling software, the data show that hiring local workers on the City’s public works projects would increase sales at local businesses by $71 million, save or create 400 jobs for Springfield residents, and increase local tax revenues by $11 million over the next five years compared with an alternative scenario in which they source nonlocal labor.

“When cities award projects to local contractors, they keep tax dollars in the community and spur local economic development,” said PMCR Director, University of Illinois Professor, and study coauthor Robert Bruno, Ph.D. “They also ensure that tax dollars are going to local companies that are training the next generation of skilled workers in the community.”

While nonlocal or out-of-state contractors may contribute to apprenticeship programs in their areas or not at all, the average local contractor invests 50 cents per hour worked by skilled tradespeople into apprenticeship programs in the Springfield area—translating into $1.4 million in local workforce development funding over five years.

“By awarding projects to contractors who are most likely to participate in registered apprenticeship programs in the area, the local business preference program would help combat local labor shortages,” added Manzo. “This would ensure that Springfield area contractors have access to a pool of skilled workers.”

With the United States investing trillions of dollars to rebuild and modernize infrastructure and contractors reporting skilled labor shortages, there is renewed discussion about public policies that can deliver both on-time delivery of projects and increased access to construction careers for qualified workers.

“This case study shows that a local business preference program can deliver value for workers, contractors, taxpayers,” concluded Bruno. “A strong America is built locally by highly trained workers.”

The Project for Middle Class Renewal (PMCR) at the University of Illinois investigates the working conditions of workers in today’s economy to elevate public discourse aimed at reducing poverty, create more stable forms of employment, and promote middle-class jobs.   

The Midwest Economic Policy Institute (MEPI) is a nonprofit organization which uses advanced statistics and the latest forecasting models to promote thoughtful economic growth for businesses and working families across the Midwest. MEPI is a division of the Illinois Economic Policy Institute (ILEPI).

Media Contact: Robert Bruno, (312) 996-2491, bbruno@illinois.edu