In today’s America, if you want to be a freelancer or gig economy worker, you need to make a basic trade-off. You get freedom, independence, and (hopefully) more money in exchange for zero benefits and lots of risk in terms of paying for health care and retirement. Investing for retirement is particularly challenging, as daily pressures often trump far-sighted financial planning. Moreover, affordable retirement savings options aren’t widely available. A new Small Business Majority poll took a look at these issues and asked free lancers about their retirement plans. The poll surveyed freelancers from around the US, and found a paradox. This surveyed group reported that they were thriving, with 53% reporting that they were “doing well.” Meanwhile, 40% of respondents had no retirement plan at all. Surveyed freelancers pointed to cash flow as a major impediment; they lacked needed savings to plow into IRAs and other existing retirement vehicles. They expressed strong support for more flexible and portable retirement savings plans that allow for easier movement between freelancing and full-time employment, and which provide more automatic procedures for enrollment and investment. These desires don’t seem like a big lift as such retirement plan features are already commonplace for full-time employees. It’s time to offer similar flexibility and savings options for the independent workforce.
When we think about America’s coal economy, we typically first think about Appalachia. But, the reality is that most coal in the US comes from the West—from regions in Colorado, Montana, Utah, and Wyoming in particular. Communities in the West are also facing challenges as the demand for coal slows, and they must seek out other economic engines to diversity their economies. Last week, I was in Denver for a conference on “Strengthening Economies in the West” and I learned a great deal about what’s happening with coal –reliant communities in the Western US. I plan to dig deeper on this topic in future blog, but, for now, let me share a few helpful resources that I learned about last week.
- The Changing Coal Industry: This report for Montana’s Coal Country Coalition assesses the regional impact of Montana’s coal industry, and maps the potential effects of its decline. It also offers a series of recommendations for how impact communities can respond and recover.
- ENDOW Wyoming: Wyoming is also looking to develop new business opportunities via ENDOW (Economically Needed Diversity Options for Wyoming) Wyoming, a new initiative to encourage communities to develop strategies for economic diversification. ENDOW seeks to link a host of initiatives such as programs to research new carbon capture technologies, a statewide outdoor recreation task force, and Wyoming Grown, an effort to bring Wyoming natives home to the state.
- IceLab: In Gunnison CO, local leaders have embraced entrepreneurship via IceLab, a local accelerator and working space that seeks to become the hub for entrepreneurs and innovators in Western Colorado.
As budget cuts hit essential government programs for community development, we all need to be searching for other sources of investment capital to support local economic development and workforce initiatives. Philanthropy must be a critical piece in this puzzle, but we all need to “up our game” if we want to make real impacts. A new study from the National Center for Responsive Philanthropy describes the extent of the challenge in the South. The research examines philanthropic grantmaking in the Alabama, Georgia, and Mississippi with a special focus on distressed regions of the Black Belt and the Mississippi Delta. It finds that per capital investments in the region average around $221 per person while the US average is about $451 per person. The average in the Black Belt and Delta regions is even lower: $41 per person. (In comparison, the New York City per person average is $1,966).
These investment gaps mean that challenged regions start from behind, and often lack the capacity to “catch up” by making new investments to build communities and development local talent. New efforts to spur community development philanthropy are needed—especially in rural America. There are lots of good efforts underway and I encourage you to check out some of the following:
A recent Brookings piece on the use of social impact bonds in Colombia prompted me on a little research project to examine what’s been happening in this space since I wrote about it a few years ago. The Colombia project, which supports skills training for at-risk populations, is itself is a big deal. It’s the first time that a social impact bond (SIB) has been used in a developing economy to support a development project. Otherwise, the SIB field appears to be chugging along. It’s not living up to all the early hype, but it is becoming professionalized as practitioners get a better sense of the types of projects and interventions that can best be supported via SIB funding. Early childhood development is one promising area. Generally, in the US, we still have somewhat limited experience with SIBs. But, many observers, including me, remain hopeful that they can become part of the funding mix for education and training programs. I continue to believe that SIBs hold great promise as a funding tool for workforce development (see this useful review from the Atlanta Fed) at a time when direct federal dollars are sure to be drying up. On another front, there is legislation in Congress to help promote use of SIBs. The Social Impact Partnerships to Pay for Results Act (HR 576) has been introduced by bi-partisan group of House members, led by Reps. Pat Tiberi (R-OH) and John Delaney (D-MD). Interest in new financing tools appears to be growing.
As regular readers of this blog know, I can get going on a good rant over the near absence of any kind of economic transition support for displaced workers in the US. Our social safety net is torn and frayed, and millions of people are falling through the net. Some recent research shows that this is not just an issue of minor policy tinkering. Our limited and underfunded transition efforts have real consequences for real people, according to new research from Anne Case and Angus Deaton of Princeton University. Their study, Mortality and Morbidity in the 21st Century, has garnered a load of media attention for its focus on increasing midlife mortality among the US working class. But, the study also shows another set of scary trends. When faced with an economic shock, such as a plant closure or a larger event like the Great Recession, American workers are more likely to suffer from continued health problems and higher death rates than their counterparts in other countries. When workers in Europe or Australia lose jobs, they also suffer. But, they also seem to recover over time. In the US, recovery is much slower and sporadic. Lots of factors appear to be at work here, but it’s clear that a weak social safety net plays a central role. When work disappears, American workers have fewer options for health care, social support, or retraining. Without resources or support, the rise of “deaths of despair” should come as no surprise. But, it should be a surprise—and a disgrace—that we aren’t doing anything about it.
One of the unintended consequences of the Trump Administration’s horrific “skinny budget” plan is that it has prompted some deep media and think tank dives into understanding the many benefits of programs now facing the chopping block. The Appalachian Regional Commission (ARC) is a case in point, as a new series of reports from the Center for American Progress shows. This research examines the overall impact of eliminating ARC, while also highlighting local impacts in each of the 13 states that comprise the ARC region. The bottom line is pretty clear: hundreds of jobs and millions in investment dollars will be at risk in every Appalachian state if this budget plan is approved.
ARC is not the only worthwhile program facing the budget knife. For a review of other at-risk programs—and the good work they do—I can also highly recommend that you check out “Why Invest in Economic Development?” This excellent guide highlights the importance of federal investment in economic development, and also shows the strong return on investment generated by these very small public investments. (Note: EntreWorks Consulting has supported consulting engagements for the ARC and other Federal agencies discussed here.)
An interesting new article in Strategy+Business examines another potential downside of the gig economy. It seems that many business sectors operate with business models that are not well suited to the independent workforce. The article examines recent trends in the trucking industry, where annual turnover exceeds a whopping 81 percent! Why are so many truckers leaving their positions? Because their jobs often suck! Some trucking firms have embraced the independent workforce because it allows them to pay less, ask for more work, and avoid cost burdens like retirement or health care benefits. But, as the high turnover rates suggest, there is no free lunch and many truckers have had enough. The gig economy can generate many benefits for firms and for workers, but there needs to be a fair exchange as well.
The trucking industry is something of a canary in a coal mine. You can see similar challenges emerging in other sectors, especially in manufacturing where the independent workforce accounts for more than 20% of all workers. We often hear employers complain of skill shortages that make it tough to fill jobs. However, in some cases, these production jobs are tough to fill because they offer low pay, few benefits, and limited career advancement options. Check out the latest issue of Business Week to see some of the safety issues around new auto manufacturing jobs. Independent work can be a boon for all—it provides flexibility for workers and for companies. But, it can’t be an excuse for exploitation. If we want this new way of working to succeed, companies and industries will need to devise new business models that offer a better deal to independent workers.
If you plan on attending next week’s National Association of Workforce Boards conference, I hope to see you here in Washington DC. I’ll be participating in the entire event and will also be chairing a panel. On Monday, March 27th at 4:00 PM, I’ll be part of a panel with my colleagues John Beatty (MassDevelopment), Dan Glasson (the Pentagon’s Office of Economic Adjustment), and Sarah Tennant (Macomb-St. Clair Michigan Works). We’ll be discussing the challenges (and potential solutions) facing small and medium sized defense manufacturers as they face defense contract cutbacks and shift to entering to new commercial markets at home and abroad. They face many of the same challenges affecting all manufacturers, but these pressures can be even more intense due to the unique circumstances around defense contracting work. Come join us to learn how community leaders in Massachusetts, Michigan, and around the US are helping these companies.
This is late notice, but I encourage you to sign up for a webinar later today on the topic of building entrepreneurial ecosystems in small and rural communities. I’ll be presenting along with my colleague Maria Meyers of SourceLink. The webinar is sponsored by the International Economic Development Council and is part of their regular series on community disaster preparedness and economic recovery. The webinar occurs today, March 21, 2017, from 2:30 to 4:00 PM Eastern Time. You can learn more and sign up here.
I’ve got a new article on the the economic transition in America’s coal regions in the latest issue (Winter 2017) of the International Economic Development Council’s Economic Development Journal. The article highlights the great progress being made in many coal regions, as well as the critical importance of at-risk Federal programs like the Appalachian Regional Commission and the Economic Development Administration. The article requires registration or IEDC membership for access. If you’re interested in a copy, send me a note and I’ll get it to you directly, too.
On a related note, the National Association of Counties and the National Association of Development Organizations are sponsoring a regional forum for coal-impacted communities in Colorado, Montana, Utah and Wyoming. This event, to be held in Denver from April 19-21, is designed to help community teams begin developing local strategies for economic diversification. It’s a great opportunity to learn from peers and leading experts and to hear from communities that have succeeded in transitioning their economies from reliance on a single industry or resource. You can learn more and sign up here.