Talent Attraction Incentives: The Debate Heats Up

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.

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EntreWorks Insights–New Books Issue

They were playing Christmas music at my doctor’s office this week.  That’s too early!  But, it’s not too early for the EntreWorks Insights holiday recommended reads issue!   Check out our takes on new and interesting books for those with wonky interest in community building, economic development, and what’s next in our profession.  You can access other newsletter issues and subscribe here.

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Global Entrepreneurship Week: November 18-24, 2019

Mark your calendars for the week of November 18-24, 2019, the 12th annual celebration of Global Entrepreneurship Week.  GEW is a big deal around the world.  It currently engages 20,000 partners in 170 countries, who sponsor 35,000 events that engage more than 10 million people.  All of this work is devoted to telling the story of how entrepreneurship can be a tool for personal enrichment, economic development, and community building.  It’s an excuse to throw a great party, while learning something and doing good along the way!  There are tons (actually 35,000) of great events going on during the week, and lots of cool activities here in the US as well.  As home to the Kauffman Foundation, Kansas City always celebrates GEW in a big way, with several dozen great events planned for the week.  I’m also pleased to see several current and former EntreWorks Consulting clients who are using GEW events and activities as part of their regional ecosystem building activities. For example, in Fort Worth, the local team is supporting a gala event at the Fort Worth Science Museum, a special Startup Weekend event, and workshops on a diverse set of topics including food-focused startups, doing business in Vietnam, real estate trends, and tips for effective marketing. Smaller towns can and do get in the mix too.  In Monroe County Pennsylvania, Startup Pocono is sponsoring workshops and boot camps on coding, entrepreneurial finance, graphic design, and many other topics.  Check out the GEW USA site for events in your area, and get out there and support your local entrepreneurs.   If your region isn’t engaged with GEW 2019, make plans to participate in GEW 2020!

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Abandoned Mine Lands: Addressing the Legacy of Coal

The US coal industry has been swamped with bad news lately, with the recent bankruptcies of Blackjewel and Murray Energy leading to major hardships for miners, their families and surrounding communities.  As we attempt to address these immediate hardships, we need to also remember painful long-term legacies of coal such as rising black lung rates and the growing problems of abandoned mine lands (AML).  This latter problem is especially thorny, as former coal regions face major environmental problems such as water contamination, land subsidence, and a dearth of funding for land reclamation.  The Office of Surface Mining Reclamation and Enforcement manages a federal AML reclamation fund with a current funding pool valued at $2.3 billion.  While this is a sizable sum, the estimated cost to remediate current AML sites exceeds $10 billion. (You can see a map of AML sites here.)

Remediating abandoned mine lands is essential if we truly want to revitalize coal-impacted communities in Appalachia and elsewhere. We will need additional funds to support reclamation and to build capacity in impact communities.  Some interesting pilot projects are underway, thanks to the new AML Reclamation Economic Development Pilot program and other initiatives, such as the POWER program for coal-reliant regions.  (See the latest edition of Appalachian Voices for nice summary of current issues.)  There’s lots of work to do, but there are also lots of opportunities where strategic investments can have huge impacts.  For a look at these opportunities, check out A New Horizon, an excellent new compendium of worthwhile and catalytic AML-related projects in Kentucky, Ohio, Virginia, and West Virginia.  Investing in land reclamation can bring short and medium-term benefits in the form of new economic opportunities and new local capacity, while also remediating long term environmental damage from past mining activities.  This is the right and fair thing to do for coal-impacted communities.

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Responding to Industry 4.0: A Global Policy Look

The Paris-based Organization for Economic Cooperation and Development is out with a useful compendium of what’s happening in innovation policy across OECD member economies.  This is a look at what’s next in innovation policy, i.e. how are policies evolving to account for the massive changes underway as part of Industry 4.0.   The policy brief offers a quick introduction to the history of industrial policy, noting that we are in the midst of a major shift in focus.   In the 1990s and early 2000s, these policies focused on improving collaboration between government and business, and in creating improved conditions (e.g. via regulatory shifts and investment programs) for business start-up and growth. The “new” approaches are more focused on transformation as opposed to supporting incremental improvements in policy regimes and business support.  What does this mean in practice?   I see a few common trends in this OECD review.  First, many countries, but not the US, are creating programs that offer a steady and stable funding/support stream for business customers.  Instead of receiving a grant or a one-time intervention, firms are engaged in a multi-year collaborative process focused on business development and process improvements.  Germany’s Central Innovation Program (ZIM) is an example.  Second, industry cluster strategies are becoming more ambitious, focused on transforming an entire industry or tackling big societal problems like climate change.  Examples include Austria’s Virtual Vehicle program and the US’s Manufacturing USA programs.  Finally, governments are creating large-scale national platforms to manage multiple initiatives, such training and R&D, and to help firms respond to the challenges of Industry 4.0.  Examples include Denmark’s MADE program and Germany’s Industrie 4.0 programs.   With the exception of Manufacturing USA, efforts here in the US are still pretty limited and not yet providing the depth and range of investments needed to address the big industrial transformations now underway.

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Investing in Capacity Building: The Overhead Pledge

Folks in the business of community building know the story when it comes to outside funders. They fund projects, not organizations.  This policy has meant that many local organizations are starved for funds. They can raise money for specific projects, but can’t invest in their people or in building up their organizations.  In practice, this means that community building organizations operate with insufficient funds to pay people, to build organizations, and to do the job right.  Organizations scale up to deliver new projects, and close when program funding ceases.  There are many reasons why these practices are short-sighted, but the most important relates to capacity building.  Starved for funds, grantees can’t invest in retaining talent, training people, developing new skills, and maintaining an experience base about what works in the field.  We constantly claim that leadership matters in economic development, yet we often fail to invest in the building blocks for effective leadership.  Capacity building—and community building—take money!

I’m now feeling a bit optimistic that this tired funding model is starting to change.  Last month, a group of major foundations, including household names like Ford and MacArthur, signed an “overhead pledge,” i.e. a commitment to do more to help their grantees pay basic business costs, such as rent, overhead, technology and other operating expenses.  This move is long overdue, and the market is ready.  A recent study by the major foundations found that 42% of grantees had less than three months cash on hand.  Thus, it’s not surprising that non-profits may close if faced with lost grants or other shocks.

The overhead pledge is an important first step, and we’ll need to see what happens next. Foundations are now looking at new approaches, such as more flexible funding tools and investment funds for organizational growth and development.  These moves are a critical recognition that community building requires new and good ideas, but it requires capable local leaders and organizations too.  Let’s hope that other foundations and other funders embrace this message as well.

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Small Business Impacts at Global Scale

The US Small Business Administration (SBA), and other small business advocates (including EntreWorks Consulting!), can regularly regale you with tons of data and statistics on the power and impact of small business for the US economy.  Now, we can tap into similar data for the global economy thanks to a new data report from the International Labor Organization (ILO), which has not normally focused on the small business-related issues.  In this study, ILO researchers tracked employment surveys from 99 countries over a period between 2009 and 2018. (Note:  the data set does not include the US and North America).  The study looked at business in various size classes, but all had less than fifty employees.  This is one of the first studies that accounts for the global impact of the self-employed and the informal sector (i.e. unlicensed businesses).  These activities may account for anywhere from five percent of the economy in developed regions to more than 90 percent of the local economy in some countries. Among the 99 studies countries, the informal sector accounted for an average of 64 percent of total economic activity.

The ILO team found that global small business is indeed a big business.  Globally, they find that 70 percent of total global employment is concentrated in small economic units.  They also found that, in low income countries, 54 percent of global workers are self-employed.  The self-employed account for 11 percent of employment in higher-income countries.   Meanwhile, the share of workers employed in small businesses (with 10-49 employees) ranges from 3% in low income countries to 25% in higher income countries.

There are countless implications related to this data, and many are well addressed in the report’s conclusions.  My one take-away is that we need to pay more attention to small business’ impact on a global scale—not simply in terms of helping people start new companies, but also in understanding and improving the work environment and career potential for the millions of people who work in small businesses every day.   We know a lot about management structures and work practices in large organizations; we need similar knowledge about what happens and what improves performance in smaller business units as well.

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The Gig Economy Workforce: 45 Million and Counting

There’s lots of competing takes on the size and scale of the gig economy.  As in some many policy areas, it depends on who’s counting and what they’re counting.  But, regardless of the various disputes, we know that the gig economy workforce is big and growing.  I’ve long referred to the gig workforce as the “Forgotten Fifth,” i.e., the one-fifth of American workers who operate in the gig economy, without a real safety net or other labor protections.  A new MetLife census of the gig economy (Note:  Registration required for full report) makes a similar estimate, arguing that 30 million Americans make their primary income from gig or part-time work.  An additional 15 million Americans use gig work as an income supplement.   Most of these workers (85%) like gig work, and intend to continue in this mode.   And, folks with “real jobs” are jealous, as nearly 49% of them report that they are considering taking on gig work or careers in the next five years.

MetLife is interested in this topic because gig workers are understandably interested in receiving benefits while retaining their independent status. At present, less than 5% of gig economy workers receive benefits from their employer(s).  If firms and insurance providers can find a way to offer this new type of flexible benefit package, it would greatly reduce the risks of gig work and help firms better attract and retain talent.  From a policy perspective, creation of gig benefits may offer a decent solution to the problem of building a safety net for freelance workers.  We can’t keep ignoring the pressing needs of 45 million American workers who want jobs and careers that provide meaningful work and a real safety net.

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Nebraska Thriving: Market Intelligence for the Rest of Us

Over the years, I’ve worked in many communities that don’t really have a good understanding of how their local economies work.  They operate with limited and/or outdated information on who’s hiring, who’s growing, and who’s doing innovative things in business and elsewhere.  Many places need better market intelligence capabilities, but some community leaders are reluctant to spend money and time on gathering and sharing data.  That’s work for academics, not for economic developers!   This mindset seems to be changing (thankfully) as more places recognize that good data can lead to better planning for community and economic development.  And, the good news is that all communities, even heavily distressed or isolated rural places, can do this work.  There are lots of great resources out there—I highly recommend networks like the Community Indicators Consortium and free data sites like StatsAmerica.  But, there are also hundreds of places that are out doing it, gathering important insights about what’s happening in their local economies.  A great example can be found at Nebraska Thriving, a new effort from the Rural Futures Institute.  The Index is an easy to use data tool that allows folks across Nebraska to track how their region compares in areas such as economic opportunity, human capital, social capital, and quality of life.  Thanks to Nebraska Thriving, local leaders now have the capacity to benchmark their performance and invest to close gaps and capture new opportunities.  This is an excellent research tool that can easily be applied to others states and regions.  With better data comes better informed—and better overall (we hope!)—decision making.

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Maine’s Coworking Development Fund

Our latest edition of EntreWorks Insights examined the power of place, i.e., how community gathering places can help build social capital and promote economic development.  These powerful places can take many forms, including business offices, libraries and coworking spaces, among others.  I’m pleased to now see that a handful of state and local governments are seeking to encourage the creation and nurturing of these “third places.” The latest example comes from Maine where the Maine Coworking Development Fund has just kicked off.  The Fund provides small grants (of up to $20,000) to help communities set up and run local coworking spaces.  It’s also creating a statewide network so that space managers and developers can learn from one another and share ideas.  This program has existed on the books since 2015, but was finally funded by Maine’s new governor, Janet Mills.  While $20,000 is not a major amount of money, this small amount can trigger lots of outside investment and make a big difference in rural Maine, where the need for new coworking spaces is strongest.  This excellent pilot program should be emulated elsewhere, as it is a straightforward, and relatively low-cost, means to build communities and networks to spur entrepreneurship and innovation, and to build community as well.

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