Many years ago, I was doing some writing and consulting work for the Organization for Economic Cooperation and Development (OECD) and was introduced to the concept of innovation vouchers, which are small grants to new companies to help defray the cost of innovation-related advances, such as getting a patent, developing a prototype, or tackling a new market. This tool works very well—it not only helps the assisted firms, but it also helps local service providers who gain new business and new skills along the way. I’ve written about the power of innovation vouchers on numerous past occasions, and still remain surprised (and saddened) that we don’t embrace this useful tool here in the US. At present, only a few locales in the US use this tool. Examples include Connecticut, Minnesota, New Mexico, and Rhode Island.
I’m glad that these states have seen the light, but they shouldn’t be alone. Innovation vouchers are a low cost tool that works. Don’t take my word for it—check out a new rigorous evaluation from the Netherlands which used randomized controlled trials to assess voucher program impacts on the performance of hundreds of firms over a 12 year period. We have had good evidence that vouchers work over the short term; these new results show important long-term impacts. When compared to a control group, the assisted firms were more likely to stay in business, to do significant R&D work, and to have slightly higher productivity rates. This is yet further evidence that these voucher tools work and that they need to be part of the toolbox for economic developers here in the US.
Next week, I’ll be up in Shepherdstown, WV, as one of the speakers on an excellent Conservation Fund program, “Balancing Nature and Commerce in Rural Communities and Landscapes.” Shepherdstown is a good location for this event, as it is a beautiful spot that faces its own development pressures thanks to the booming nearby DC metro area. I’ve participated in this program for several years and can highly recommend it. It engages small teams from rural regions around the US. Project teams typically hail from locations with large national or state parks, or some other unique or precious natural resources. This year’s teams come from Maryland, Oregon, Pennsylvania, Puerto Rico, and Virginia. They hail from differing locales, but they all share a commitment to doing economic development right, i.e. in a manner that builds local wealth (across all kinds of capital) while preserving the natural assets that make their places unique. This will be a fun and inspiring event.
In recent years, we’ve seen a number of interesting new community development models being used out in the field. I’ve had good fortune to use the WealthWorks approach on a number of projects, and you can count me as a big fan. To briefly summarize, WealthWorks is an asset-based community development strategy that helps region to understand their assets (forms of community wealth) and to help grow and retain assets that remain anchored in the community. Economic developers all focus on building some kind of wealth, normally in the form of money or jobs. But, the WealthWorks approach is more holistic, and more focused on building local resilience and capacity. It does not just emphasize financial wealth, but instead has a holistic view that communities should focus on multiple forms of wealth. These include the Eight Capitals: Intellectual, Financial, Natural, Cultural, Built, Political, Individual, and Social. This broader vision of capital allows communities to better understand community assets and to find new ways to engage these assets.
My very brief summary does not do justice to this methodology, but the good news is that it doesn’t have to do so. You can now tap into a new book on WealthWorks: Wealth Creation: A New Framework for Rural Economic and Community Development. This is an excellent one-stop guide for how the Wealth Matrix works, and how it can be applied in real world situations. If you’re looking for new ways to advance your community, this book and the useful WealthWorks website are well worth your time. I have found this approach to be helpful in my own work, as it helps communities view themselves with a fresh perspective and an effective framework for action.
If you’re a follower of US science and technology policy, you likely have heard and read a lot about the DARPA (The Defense Advanced Research Projects Agency), the Pentagon’s independent research arm. DARPA gets this attention for a reason. It has an impressive track record: it “invented the internet” or at least pioneered its early development and rollout. And, it’s also backed major breakthroughs in major fields like semiconductors, autonomous vehicles, and satellites.
For many, DARPA represents a path not taken—where the US could have assumed a more expansive role in investing in R&D and scientific advancements. If we were going to get serious about industrial policy, we’d likely do it with some version of DARPA, which has a great track record of making investments that provide benefits for government agencies, businesses, and the general public. (There’s a reason why DARPA-like agencies exist at the Departments of Energy and Homeland Security too).
If you’re intrigued about the history and potential future of DARPA or DARPA-like institutions, you’d be hard pressed to find a better guide than a new book entitled The DARPA Model for Transformative Technologies. (A potential alternative title? “Everything you ever Wanted to Know about DARPA but were Afraid to Ask”). The book is edited by Bill Bonvillian, Dick Van Atta, and Pat Windham, all of whom have toiled long years in the technology policy world. It’s a deep dive, with 15 chapters digging into DARPA’s history, processes, and industry connections. This is a highly varied set of contributions, but the final concluding chapter does a good job of summing up. DARPA is a high performance organization, but its success is highly dependent on the robust innovation infrastructure around it. If we want to see more successful innovation polices, we can’t just clone DARPA. We also need to make real and sustained investments in innovation across the board. NOTE: The book is available for free download here.
New York’s Rockefeller Institute of Government has created a new Future of Labor Research Center, and the Center’s first study is making me optimistic about their future work. Where the Mobile Workforce is Living shares data and insights on, you guessed it!, where the mobile workforce is living. Specifically, it reviews the latest numbers on home-based workers, and shows that, nationally, about 5.3% of Americans currently work from home. This may not sound like a big number, but it accounts for 8.2 million people. And, their recent growth rates—up 47% since 2005—is pretty impressive too.
A deeper dive into the date offers some useful trends. A large number of these workers are based in traditional tech centers, but many are located in other places as well. In fact, the highest relative share of at-home workers can be found in places like Summit Park UT, Boulder CO, and Taos NM. (Fort Leonard Wood, MO has the highest share among US regions). Economic developers will be intrigued by survey results that show 7 out of 10 surveyed at-home workers would consider moving to a new location and are looking for locations outside of major cities. This suggests that strategies to attract and recruit at-home workers (what we used to call “lone eagles”) could pay dividends.
The report suggests two broad approaches to this “recruitment:” 1) Push local amenities as a magnet, especially in scenic areas of the Mountain West and elsewhere, and 2) Mix recruitment and local entrepreneurship programs to help the self-employed (both existing and new residents) to develop and grow businesses. This latter strategy is being embraced via new programs—in areas like Vermont, Tulsa OK, the Shoals region of Alabama—that offer incentives to attract new workers and entrepreneurs. If these trends persist, these strategies are likely to become a more important part of the program mix for rural communities around the US.
Local food systems development has been a hot topic in community development circles for some time now. These efforts typically use agriculture and food development as tools to advance community economic development and to improve community health outcomes. They may include programs that develop farmer’s markets, provide local food at area schools and hospitals, or create local capacities for value-added agriculture. Many such efforts also revolve around the development of kitchen incubators or commercial kitchens, where entrepreneurs can produce food products at scale, and learn the ins and outs of business development. An excellent new compendium, U.S. Kitchen Incubators: An Industry Update, provides an in-depth look at what’s happening in this sector.
This is the third such study, with previous releases in 2013 and 2016. Today, 600 such facilities are operating around the US, and 180 locations participated in this survey. Most sites are very small, with 69% of surveyed locations operating with less than 5,000 square feet of space. They also operate on tight budgets—half of spaces have budgets of $500,000 or less. They offer a mix of services, such as storage space, classes and workshops, food production spaces, and help with licensing and certifications.
The report describes an industry in what we might call the awkward teenage years. It has grown in numbers and in the range of activities under way, but it has not yet developed a systematic set of programs, metrics, or “best practices.” Facility and program managers would like to see better support systems, such as consulting and mentoring, and, as always, program funding, especially working capital, remains scarce. The industry is doing a good job of addressing these growing pains, and continued growth is expected. That’s a good thing—as these facilities are an important cog in building more prosperous—and healthier—communities.
Our colleagues over the in UK have come up with some useful terms for what we Americans have been calling the gig economy workforce. Some folks use the “precariat” and a new term, the “liquid workforce” is also gaining traction. A new Demos study, The Liquidity Trap, examines the precarious experience of Britain’s liquid workforce, with a focus on improving the social safety net for independent workers. Work life for Britain’s liquid workforce can be challenging. These workers are much more likely to be poorly paid than their fully employed counterparts. In fact, while a segment of these workers are well-paid, 22% of the UK liquid workforce makes less than $13,000 per year. Not surprisingly, these workers also tend to have spotty benefits, and are also more likely to use non-traditional financial tools like pay-day lending. Liquid workers like the flexibility of this work style, but nearly half would be willing to trade flexibility for a more secure work experience.
The report makes a number of recommendations to improve services for the liquid workforce. These include the development of new financial services for independent workers, and new schemes that allow workers to move with benefits as they transition to new work. This latter provision might work something like our current COBRA laws which allow for extended health care coverage. The report also calls for bigger solutions, such as a national funding pool that could provide portable benefits to this workforce. Several European economies, including Belgium, use a benefit model of this sort, which is often referred to as the Ghent system (named after the city of Ghent, Belgium). While the report is UK-focused, it contains some interesting ideas—big and small—for how we can better support the growing independent or “liquid” workforce.
Washington is pretty consumed with big issues of impeachment and government budgets nowadays, but lots of interesting and important debates on other issues are also underway. One big one concerns reform of the Community Reinvestment Act (CRA), the 1977 law that reviews and assesses bank performance in terms of lending and other activities focused on low-income communities. Among other things, the CRA was originally designed to combat “red-lining” and to encourage more bank investment in distressed communities. (For background on CRA’s impacts, check out this 2019 Urban Institute report.)
Federal agencies have been debating CRA modernization and receiving community and industry input for some time. Last week, the Office of the Comptroller of the Currency (OCC) released its draft proposals for CRA modernization. There’s a lot in this plan, which weighs in at 240 pages in length. One primary focus is to clarify what activities and investments count for CRA credit. Nearly all observers agree that banks need more clarity and guidance on CRA-related investments, but many advocates for distressed and under-capitalized communities are worried about the current draft. They argue that the new rules are too “loose” and will encourage investments in projects, such as sports stadiums or higher-priced real estate, that do little to help low income communities and residents. Big changes in CRA rules could have especially strong impacts on sectors like the Community Development Financial Institutions (CDFI) industry, which relies heavily on CRA-related investments.
We will soon be in the midst of a 60 day comment period on the OCC’s proposal. If you have ideas and inputs, please share them so that they can be considered before a final rule is promulgated in spring 2020. You can also learn more about positions on all sides of the debate from the American Bankers Association to the Opportunity Finance Network to the National Alliance of Community Economic Development Associations. CRA has been, and will continue to be an important tool in our community development toolbox. Thus, it’s essential that we find ways to ensure that these dollars are invested in a manner that best supports economic and community development.
Today, I attended a Capitol Hill briefing on a new Brookings/ITIF report on The Case for Growth Centers: How to Spread Tech Innovation across America. The report and its recommendations build on the uncomfortable fact that America’s innovation and technology economy is highly concentrated, with most activity centered in a few states and metro areas. In fact, only five metro areas account for 90% of America’s innovation sector growth since 2005. If you’re in Seattle, Boston, or the Bay Area, you’re reaping the benefits of major technology investments. If you live elsewhere, you might see some limited trickle down impacts. The report recommends a series of new investments in regional growth centers (in mid-sized to larger cities like Birmingham, Boise, Indianapolis, or Pittsburgh), with an emphasis on strong innovation inputs—in the form of R&D funds, workforce training dollars, and other incentives. In many ways, this proposal echoes similar efforts such as the Economic Development Administration’s I6 program or the WIRED program of the 1990s. (As we noted in our recent newsletter, the new book, Jumpstarting America, includes a similar proposal.) The difference here is that this plan calls for real money–$100 billion over ten years—and the funds are targeted to high-potential larger metros (over 500,000 in population) that have many of the essential innovation building blocks already in place. Not surprisingly, I like this basic concept as I strongly believe that we have been underfunding place-based economic development for decades. I can quibble with some parts of the plan. For example, it may place too much emphasis on innovation and technology inputs and not enough attention on talent development. I’d also like to see a similar focus on smaller metro areas as well. But, it’s a good start and a good place to begin a much-needed debate, and hopefully conclude with some equally much-needed new policy directions too.
In today’s tight labor markets, communities around the US are starved for talent. Some places are so starved that they’ve created incentive programs to attract talented workers. Some years ago, several places in Kansas opted for free land as a potential talent magnet. Today’s incentives tend to be cash-based, either as direct payments or some form of alternative support such as student loan forgiveness in certain high-demand fields. New programs in Tulsa and Vermont, among others, have been recently introduced, and are focusing on attracting remote workers and free-lancers. Vermont’s program was unveiled in 2018, and offers up to $10,000 to support some expenses for incoming workers. In year one, the program attracted 300 new residents, but this effort is already sparking a heated public debate Last week, the state’s auditor raised questions about the program’s impact and value. In this report, his office argued that the program is providing incentives to people who would have moved to Vermont any way. This debate over the “but for” question is common: Would the desired action have occurred “but for” the incentive? The audit claims that Vermont’s new talent migrants are coming for quality of life and natural amenities, and don’t need the incentive. That may be true, but it’s also true that folks who move only because of a $10,000 incentive may not be the type of talent we want in our communities! There are no easy answers here, but this type of discussion is likely to become more common as communities around the US introduce more innovative—and more risky—strategies to close the talent gap.