Quality of life matters more to businesses than it does to households. That may seem counterintuitive, but the data are unambiguous and the implications for economic development are profound.

For years, I've written about how quality of life drives regional prosperity through population growth, both by attracting new residents and by keeping existing ones. That argument has persuaded many state and local governments to prioritize amenities in their communities, but they may be underselling it because the costs of neglecting quality of life are just as real as the benefits of investing in it.

In struggling communities, families will pay less for an identical home than they would in a nicer area. That's why I cringe when cities are happy to be named a “most affordable city.”

At the same time, workers demand higher wages when they live in a low-quality-of-life community. This is precisely why businesses should care.

Let me provide a clear example. Almost two decades ago, when I met my new neighbors in Muncie, I commented on how lovely I thought the neighborhood was and how excited I was to be at Ball State. My neighbor agreed and mentioned he was responsible for recruiting physicians to the local hospital.

During the course of his work, he was shocked that they had to pay more for physicians with the same experience in Muncie than in Carmel, even though homes were much less expensive in Muncie. Carmel has much better schools, much more walkable communities and more recreational amenities. That is the quality-of-life effect on wages and home prices.

I’m not picking on Muncie. It is hard to compete with Carmel, and there are a lot of Muncies around the Midwest. In fact, that’s the chief reason why economic growth has been so sluggish across the Great Lakes states.

Places with higher quality of life attract residents at a much higher rate than less desirable ones. In fact, the effect is so large that it swamps almost every other aspect of an economy.

The biggest predictor of differences in population growth rates in U.S. counties over the past 50 years has been quality of life — which, interestingly, is a far better predictor of employment change than population change. Businesses, it turns out, are even more responsive to it than families are.

This should not be surprising. There are two types of businesses — those whose customers are local, and others, often called footloose, that can locate anywhere because their customers are spread across the globe.

The differences in job creation since the late-1960s (when this data is first available) have been stark. The U.S. has created about 88 million jobs, of which about 90 million are in locally rooted businesses. All the job growth over the past half-century has been in firms that provide goods and services locally.

The U.S. created just 229,000 net new jobs in 2025 — a terrible year. Businesses serving local customers added 774,000 in just two sectors, meaning every other part of the economy — factories, logistics, the kinds of businesses that could set up shop anywhere — actually lost jobs on net. The long-term reason is automation and productivity.

Now, there are some jobs within the locally rooted sectors that are increasingly able to be done anywhere. About 1 in 4 college graduates work remotely, at least part time. Technology will allow far more to do the same. This gives more workers the freedom to live where they want.

Still, what does quality of life do for a business that can move anywhere because it is making goods or providing services that are sold outside the local area?

That's easy. They still need employees — or, at least, most do. Data centers don't need workers in any numbers, but most other footloose businesses need to be near their people. For those firms, amenity-rich locations offer two compelling advantages.

First, these communities are growing while struggling ones are losing population. A broad middle tier remains static for now, but with an imminent decline in the American labor force, almost all future growth will cluster in the most attractive places.

Second, workers in desirable communities don't demand the same wage premium they would in less appealing ones, meaning labor costs are actually lower in places where people actually want to live.

There are a few exceptions to this pattern, but they are clustered in shrinking or low-employment sectors. For example, a great deal of value-added agriculture chooses to locate in less desirable communities. They are looking for locations with a large share of low-skilled workers, typically immigrants. That business model is under significant stress today, making it even less of a growth sector in the years to come.

The most powerful economic development tool available to any community isn't a tax incentive or a new highway interchange — it's making the place worth living in. Over the past 15 years, that has mattered even more to employers than to the families they employ.

Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.