BOZEMAN, Mont. — When Kudos & Co., the Silicon Valley-based tech startup behind a new social media app for kids, announced in September it was opening an office in Bozeman’s Cannery District, company officials sang a familiar refrain.
The venture would bring jobs to the area. And plenty of them.
In addition to one full-time and seven part-time employees, the company had plans to hire a “couple hundred” workers over the coming year, CEO and founder Ole Vidar Hestaas said at the time.
Now, however, the company appears to be hedging on those words.
“We can’t currently comment on the growth of 100s just yet as we are still in the early phase of the app and will scale moderation as the app scales,” wrote Kudos spokeswoman Melissa Hourigan. “(We) are still evaluating the 2018 hiring plan, but our team in Bozeman will grow to support the scaling of the app.”
Kudos is just one example in a larger trend of companies touting their ability to create jobs and, in many cases, coming up short, the Bozeman Daily Chronicle reports. It’s a trend, too, that has raised questions about the validity of job-centric rhetoric that tends to dominate discussions, both political and public, surrounding the economic health of a place.
In 2016, then-CEO Justin Bigart wrote that his Bozeman-based tech company Wisetail planned to “create more than 100 tech jobs … with an average salary of $75,000 over the next three years.” Halfway through Bigart’s timeline, the company has hired 24 employees. Wisetail currently employs 39 workers.
Bigart stepped down from the company earlier this year after Wisetail was acquired by a Texas business, and current CEO Ali Knapp said the 100-job mark is no longer on the table.
“We were happy to open up the jobs we did,” said Knapp, adding that hiring is often “dependent on the market, industry growth and bigger economic factors as well.”
“There are so many variables that go into it,” she said.
Companies like Kudos and Zinovo, a Bozeman tech outfit that projects it will hire between 20 and 30 employees by 2019, still have time to reach their goals. But industry members cautioned that the natural unpredictability of business and wider economic influences make it difficult to predict long-range hiring with any degree of certainty.
Several companies contacted for this article would not disclose employment numbers. Credit rating and software analytics company FICO opened a Bozeman office in 2016 and announced it would be hiring 50 employees over the following 18 months. The company did not respond to multiple requests for comment. Kohl’s, which said it would employ 130 people following its 2011 opening, did not answer questions regarding its current workforce.
Then there’s Oracle Corp. In 2015, Greg Gianforte — who, at that time, had yet to formally announce his campaign for governor of Montana — headlined the company’s 10-year lease on a new 20,000-square-foot building.
Though Gianforte declined to specify a hard and fast number, he noted that the move would likely bring more high-paying jobs to the valley, according to Chronicle reports.
However, less than a year later, Oracle relocated jobs from its Bozeman offices to San Antonio. More than 100 employees were affected by the transition, several sources inside the company said at the time. Oracle declined to comment for this story.
Few companies proved exceptions to the rule. During its ribbon-cutting, Bozeman Health noted it would hire more than 35 workers at its Big Sky Medical Center. The hospital currently employs 52. Local bakery Montana Cookie Co. proposed hiring 42 temporary workers and ended up with 60.
Many businesses across Montana have disclosed their hiring projections as part of the Big Sky Economic Development Trust Fund Program — one of the state’s economic development and job-creation mechanisms.
Created back in 2005, the program was funded up front by $20 million from the coal severance tax fund, three-quarters of which funnels to job-creation grants for individual companies, with the rest reserved for planning projects — costs related to preparing for new building or expansion.
On the job creation side, the positions are intended to be well-paid — 170 percent of the state minimum wage ($8.30 per hour as of Jan. 1, 2018) or the average weekly wage of the firm’s county of operation. Companies are also required to provide a dollar-for-dollar match for the funds.
In order to secure a contract, companies must provide a business plan, financial statements and projections, as well as a hiring plan that includes a timetable. The state typically gives companies up to two years to complete their hiring and only pays out on the grants after the jobs are created (up to $7,500 per position).
Since its inception, 114 companies have taken advantage of the job creation aspect of the program, including 11 in Gallatin County.
But most of these companies have fallen short of their projections. In fact, only one of the Gallatin Valley companies that have taken part in the BSTF program over the past 10 years — Simms Fishing Products — created the number of jobs proposed in their contracts with the state. Statewide, only 23 percent of companies have created the number of jobs they proposed through BSTF, although some of the contracts remain active.
Over the same 10-year period, the state paid out $10.8 million, roughly half what it would have had all the proposed jobs been created.
As with the private announcements, the reasons for these shortcomings run the gamut. EMTEQ, an aviation company that had a contract with the state to create up to 80 jobs, was acquired in 2014 and closed its plant in June of this year without creating a single job. Lolo-based LGT Sustainable Energy Systems, Inc. projected it would add 73 positions through the grant program, but created none. Several companies withdrew from their contracts entirely.
Still, Paul Reichert, executive director for Prospera Business Network, the economic development agency that coordinates many of the BSTF grants for companies in the valley, said the program has been a success, reasoning that companies will have varying reasons they won’t meet expectations, but that any new jobs signal a net positive for the community.
However, the fixation on jobs created as the de facto metric might be the wrong way to look at an area’s economic vitality, Reichert added.
“I don’t love the measure of jobs as the thing people are counting,” he said. “It’s a tool that everyone has inherited as a way to document how we’re making an impact, but it’s not always ideal.”
In Gallatin County especially, where the unemployment rate currently sits at 2.8 percent — well below state (3.9 percent) and national (4.1 percent) levels — the emphasis should be less on the number of jobs created and more on the wages of those jobs and what sectors they fall under, Reichert said.
“Here we are with clearly full employment,” he said, “so is that really the measure that’s going to tell us anything?”
For Ray Rasker, executive director at local think tank Headwaters Economics, employment numbers are only part of the equation.
The preoccupation with jobs has perhaps distracted from some of the subtler economic undercurrents taking place in the valley, Rasker said.
Low unemployment, combined with a glut of help-wanted signs, has led to a tight labor market — a situation that typically favors prospective employees who have the pick of the litter when it comes to jobs.
But a job boom like Bozeman’s has its fair share of negative effects, too. Companies that raise wages in order to attract employees often also raise the cost of their goods or services in order to balance the books, leading to a general higher cost of living in an area. A prolonged tight labor market, economists note, can potentially result in an economic slowdown as employers, unable to find workers, cut back on growth and staffing.
Rasker said that the valley’s economic expansion has happened too quickly for other sectors — namely housing — to keep up, and he reckons this, combined with the area’s scenery-as-selling-point, goes a long way toward explaining why wages haven’t risen as they should.
“Employers are able to recruit people on the quality-of-life basis, because this is such a great place to live, and therefore offer a smaller wage,” Rasker said. “That’s predatory behavior.”
And while Gallatin County may stand out in terms of the state’s economic landscape, the idea of having plenty of jobs, but not enough good-paying ones, is a theme that Rasker says resonates on a much wider scale.
“That’s where much of the unrest is in this country,” he said. “People see how the unemployment rate has gone down and jobs have gone up, but wages are flat. You hear that a lot, and people are frustrated.”
That’s why, Rasker said, the focus should be on the standard of the job, both in terms of pay and general satisfaction, rather than on the big, shiny number on which companies so often love to hang their hats.
“It’s not just about jobs, it’s about the quality of jobs and the wages of the jobs,” he said. “Can people afford to live here on the wages that they’re paying? That’s the question.”
Information from: Bozeman Daily Chronicle, http://www.bozemandailychronicle.com