The Opportunity Bank

I’m not sure that access to capital is the number one problem facing small business today, but it clearly serves as one factor that contributes to lower business start-up rates, more business failures, and slower small business.  That’s why I’m pleased to see that Third Way, a newish DC-based think tank, is pitching a big idea that they are calling the Opportunity Bank.  The Opportunity Bank is a proposed trillion dollar funding pool (over ten years) that would update and supercharge the US Small Business Administration’s (SBA) 7a loan program, which currently serves as one of the largest sources of debt capital for small business.  The 7a loan program is popular, but it falls far short of meeting current needs.  The Third Way report hits this issue hard, noting recent Fed research showing that many firms fail to even pursue loans due to bureaucratic burdens and fear of rejection.  The Opportunity Bank would increase lending via more funds for lending, reduced administrative fees, and other tweaks to increase both interest in and use of these loan programs.  This is an interesting concept and a hopeful sign that new ideas for supporting small business may get a hearing in DC and beyond.

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Community Colleges as Incubators of Innovation

Since it first launched in 2002, I’ve been a member and close partner of the National Association for Community College Entrepreneurship (NACCE).  That’s why I’m so excited to see that the current NACCE leadership has put out an excellent book, Community Colleges as Incubators of Innovation, which distills lessons from NACCE’s 15 years of work to encourage community colleges to take a leading role in training students and assisting communities to start and grow new businesses.  This excellent edited volume is full of insights that are relevant not only to community college staff and partners, but to community and economic development leaders as well.  Chapters cover topics such as how to build and support regional ecosystems, working in rural regions, linking entrepreneurship and workforce programs, and how to teach and instill an entrepreneurial mindset in students.  Like community colleges, the book offers a great fusion of academic and real-life wisdom, mixing new ideas and approaches with focused case studies on what really works in both colleges and communities.

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The State of Federal Economic Adjustment Assistance

Much of the most important work we do in economic development is about what government agencies call economic adjustment, i.e. helping workers, businesses, and communities affected by an economic shock, such as a plant closing or a wider economic downturn.  In the US, we pay lip service to supporting economic adjustment, but we don’t really deploy real money to support this important mission.  That’s my take-away from a new Government Accountability Office (GAO) inventory of Federal economic adjustment assistance programs.  This inventory is the first piece of a larger analysis of these programs requested by Senators Coons (D-DE) and Moore Capito (R-WV).  GAO researchers are always impartial and non-partisan, so the inventory offers a straight-up inventory with little editorial comment.  It identifies 15 federal programs and one tax expenditure program that support economic adjustment.  Examples include trade adjustment assistance for businesses and workers, the Pentagon’s Office of Economic Adjustment, and the POWER program focused on helping coal-impacted communities.  These are all excellent programs, and I’ve consulted for many of them.   This well-meaning and comprehensive inventory does not note (but I will) that these efforts are woefully underfunded.  My calculations suggest that total federal spending on these programs (FY 2017) was about $1.78 billion, with more than half of the funds devoted to worker retraining at the Department of Labor (WIOA Dislocated Worker Block Grants to States).  This may sound like a big number, but it is tiny in relation to the needs of laid-off workers, their families, and distressed communities.  Recent research from the OECD and others suggests that the US needs to step up its game in terms of helping displaced workers deal with job loss, and gain new skills to re-enter the workforce.   I hope this work from GAO can help stimulate more discussion on this important topic.

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EntreWorks Insights, February 2019

The latest edition of our e-newsletter EntreWorks Insights is now available.   This issue looks at the growing challenge of rural housing, where housing shortages and affordability pressures are having profound negative impacts on economic mobility and local economic development.  You can subscribe to future issues and see past issues here.

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Brexit and the UK Shared Prosperity Fund

Whenever I’m losing faith in the American political system, I look to our British colleagues dealing with Brexit and think:  “It could be worse.”  The ongoing Brexit process is a colossal disaster with ripple effects across the British government and society.  Our British economic and community development colleagues are in the midst of it too, as they struggle to create what they are calling the Shared Prosperity Fund (UKSPF).  This fund is designed to replace the billions of regional development funds that were previously invested to support distressed regions across the UK.  For some regions, such as Wales, the EU has provided a sizable level of investment.

The Shared Prosperity Fund was first proposed by the Conservative Government in 2017, with formal consultations and planning to be completed by late 2018.  This work has not yet been completed, and the process has been described as “maddening” by some observers.  Over the past year, there has been a lively debate on what the UKSPF should look like.  Here are interesting takes from a special All-Parliamentary Group, the Institute for Economic Development, and other advocacy organizations like Locality, the Joseph Rowntree Foundation, and the Federation of Small Businesses.

I won’t summarize all the details here, but simply point out that Brexit is and will continue to have massive repercussions for how the UK supports economic development.  While the high-level UK-EU negotiations continue, critically important policy decisions are also being made.  It’s not just about how to replace the lost funds, but the debate also addresses key questions such as the role of local governments, the focus of new investments, and procedures for accessing and measuring the impact of UKSPF funds.  The current overall uncertainty around Brexit suggests that the UK’s distressed regions will not fare better under the new rules and regimes.

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Economic Mobility in Rural America

I missed this report when it came out in November 2018, but I can highly recommend a new study from Bridgespan Group and the National 4-H Council entitled Social Mobility in Rural America:  Insights from Communities whose Young People are Climbing the Income Ladder.  The study builds on the well-known research of Harvard’s Raj Chetty and others that examines the sad state of economic mobility in the US.  Their Opportunity Atlas maps how where we live determines our future economic mobility.  The Bridgespan/4H study pivoted from this research and sought to examine what’s happening in rural regions that doing a good job of promoting economic mobility.   This field report examines communities in Texas, Minnesota, North Dakota and Nebraska, seeking to understand how these regions help their young people move up the economic ladder.

The report offers some good questions that any community should ask of itself:

  1. Does our community expect all our young people to participate and stay engaged?
  2. What support systems are we providing to our youth, and which are most needed?
  3. Are we imbuing our young people with a sense of possibility and helping them plan accordingly toward a better life?
  4. Are we providing a wide array of opportunities for youth to build life skills?
  5. What actions are we taking to extend access to resources and opportunities to all our people, regardless of their income, race, religion, or location?
  6. What steps are we taking to build the “demand side” of the economic opportunity equation—are we making our community a place where young people want to remain or return to if they leave?

The report also offers hands-on guide to programs and initiatives to promote economic mobility.  To summarize, successful communities have high expectation, strong support networks, and a conscious focus on providing good learning opportunities for youth. While the study’s focus is rural, this is good advice for any community.

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Public Libraries and STEM Education

I have been a lifelong aficionado of public libraries and continue to believe that economic developers don’t do enough to tap into this critical community resource.  In today’s world, there really is no other public place that is open to all, and where folks from all walks of life can spend time without buying something or being part of special club or organization.  There are lots of great resources on how to tap into public libraries to support economic development, and the range of potential program options is massive.  Among other things, public libraries provide research and market analysis to companies, host maker spaces, and help to sponsor community dialogue.  As a new policy brief from Harvard’s Global Family Research Project shows, they can also be an invaluable resource for promoting STEM education.  The report, Public Libraries Engage Families in STEM, how libraries can design and promote programs that engage young people—and their parents—in STEM education efforts.   The report reviews dozens of programs and offers great tips on how to raise funds, how to engage rural families and how to ensure that diverse groups of students can tap into these resources.  It’s an excellent hands-on guide with real-life tips on what works.  Check it out!

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The Gig Economy in 2019

As 2019 opens for business, public debates about the size and importance of the gig economy are likely to remain in the news.  I expect we’ll see several trends over the next few months.  Certainly, we’ll see continued debate on the size of the gig economy.  Just last week, the authors of a major gig economy study, Alan Krueger and Lawrence Katz, have retracted their original findings, arguing that they overestimated the number of gig economy workers.  They now estimate that 2% of the US workforce has non-traditional employment—as compared to their earlier assessment of five percent.   A Bureau of Labor Statistics study, released last summer, found that about 10% of US workers in non-traditional employment situations.  But, these studies are certainly not the last word—as solid data on the gig or 1099 economy is still lacking.  For example, the Federal Reserve’s annual survey of household economic well-being finds that 31% of Americans engaged in gig work in 2017.  So, we can expect to see continued debate—and varying estimates—on the size of the gig economy.

Meanwhile, local leaders will likely plow ahead and simply assume that, regardless of size, the gig economy is with us and that new programs and policies are needed to address its impacts.  On this front, I’m heartened by Brooklyn’s new Freelancers Hub, a joint effort of the Freelancers Union and the City of New York.  This is one of the nation’s first workforce development efforts specifically targeted to freelancers.  It operates as a coworking space, so, in this sense, it’s not unique.  But it is unique in that it provides specialized training and support programs for freelancers, much like what you would find at typical workforce one-stop center.  The hub is booming, and it already has 4000 members since it opened in October 2018.  Hopefully, more communities will embrace this kind of new and innovative thinking about the gig economy in 2019.

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Bold (and/or Misguided?) Predictions for 2019

For some reasons, I’ve decided to take a chance and make some predictions for what might happen in economic development policy discussions this year.  Given our current volatile political climate, this task is somewhat risky, but I’m still giving it a shot.  Below, you can see my take on some policy issues and debates that I expect to heat up this year.  Feel free to share your reactions or your ideas as well.

  • Second Thoughts on Opportunity Zones?

Opportunity Zones have received a lot of hype this year and rightfully so.  They have the potential to bring significant new investments to many distressed communities.  I want this program to succeed, but I still remain nervous about its prospects.  I have little doubt that investors are flocking to these funds, which offer generous tax breaks.  I’m less certain that catalytic investments will reach areas that really need it.   The jury is still out on the program, so I’ll remain optimistic for now.  But, I do see an increasing potential for an opportunity zone backlash to emerge, especially if the heavily hyped benefits of zones are slow to emerge.  (One example:  Here’s a recent piece that refers to “Trump’s gentrification scheme.”   This pushback may also be melded into wider critiques of the Trump tax cut plan (which included the original Opportunity Zones language) and wider concerns about the overuse of economic development incentive programs.

  • Rural Housing Gets Attention

We’ve heard a steady refrain from employers for at least ten years:  “I can’t find workers with needed skills or work ethic.”   I still hear this complaint, but now I also hear: “Even if I find workers, they have no place to live in our community.”   Housing affordability and availability has been a huge problem in hot urban markets for some time.  It’s now recognized that similar problems exist in rural regions where housing for families or professional workers is in short supply.  At present, there appears to be little White House interest in tackling these issues, but I do expect more public debate and discussion on the role of housing as a key driver for economic in rural communities.  We can also expect housing (in all communities) to be an important agenda item for the 2020 elections.

  • Occupational Licensing Debates

There continues to be a lot of bipartisan support for cutting back on occupational licensing rules, which are deemed by many as a bureaucratic obstacle for many budding business owners.   We hear lots of horror stories about long and costly licensing procedures for massage therapists, manicurists, and the like, but we also know that there is voluminous evidence that shows that credentials and accreditations offer a huge lift for disadvantaged workers seeking better paying jobs and careers.  While it’s unlikely that the US Congress will make licensing reform a priority this year, we can expect that state legislatures will continue to work on these issues.  If you want to track these efforts, I highly recommend the National Conference on State Legislatures Occupational Licensing web portal.

  • New Federal Program Opportunities

Ongoing political turmoil in Washington means that the potential for new federal programs is pretty limited.  But, there are two areas where I expect we’ll see some activity or even some new funding opportunities.  The newly enacted Farm Bill includes a new Rural Innovation Stronger Economy (RISE) grant program that could provide new funds ($500,000 to $2 million) for “rural jobs accelerator partnerships” that focus on supporting innovation and entrepreneurship in rural areas.  This program will need to be further developed in 2019, but it offers potential.  A second opportunity focuses on defense-related manufacturing.  The FY2019 Defense Authorization bill includes provisions for a Defense Manufacturing Communities program, somewhat similar to an earlier Investing in Manufacturing Communities Program (IMCP).   Funding and program design questions are still being debated, but I expect to see some new defense manufacturing-related investment programs in 2019.

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Our Holiday Book Guide!

It’s the holiday season and you may be on the lookout for gifts for family, friends, and colleagues.  If you’ve got a policy wonk on your list, EntreWorks Consulting is here to help.   I’ve made my list of new and notable books—all of which I read at some point in 2018.  Take a look and if any of these mini-reviews entice you, go out and buy a copy—preferably at a local independent bookstore or other small business.  Best wishes for happy holidays filled with good reads!

  • Jay Shambaugh and Ryan Nunn (eds.).  Place-Based Policies for Shared Economic GrowthThis edited volume comes from the Hamilton Project.  I don’t always agree with every idea from this team, but I respect them for taking on tough issues and offering concrete and realistic policy recommendations.   This volume examines issues related to the Geography of Prosperity, which is also the title of its introductory chapter. That chapter itself is well worth reading, as it ably  distills the major challenges facing distressed regions today.  Other essays examine related issues and causal factors such as racial segregation, the role of higher education, and new government grant programs for lagging regions.  The volume is available as an e-book too.
  • Viktor Mayer-Schonberger and Thomas Ramge, Reinventing Capitalism in the Age of Big Data.  We hear a lot about how robots are coming for our jobs, but I’ve always felt that, beyond the hype, the rise of AI will have a more nuanced impact on our economic lives.  This book, which doesn’t shy away from big questions, offers a fascinating take on how big data and AI will transform capitalism.  It’s hard to briefly summarize their case, but let me try:  they argue that data will ultimately supplant money as the market’s key driver and as the source of wealth creation.  In data rich markets, data supplants money as the conveyor of information and value.  If you buy this premise, you can imagine that the transition to data rich markets will be interesting, and perhaps terrifying.  The authors offer their own guidance on how we can manage the transition, and capture the benefits of rich data, which should ultimately yield richer and more efficient markets.
  • Mike Madison, Fruitful Labor:  The Ecology, Economy, and Practice of a Family FarmI’ve been fortunate to work on an agriculture-related project this year, and have thus been attracted to related books.  I thoroughly enjoyed Fruitful Labor, which was a fascinating real-life guide to what it’s like to actually run a family farm. It didn’t convince me to take up farming, but it did increase my already high admiration for what America’s farmers do to put food on our tables.
  • Maria E. Meyers and Kate Pope Hodel.  Beyond Collisions:  How to Build Your Entrepreneurial Infrastructure.   This one was published in late 2017, but I read it in 2018 and am thus including it hereJ  I’ve plugged this book before, but it deserves two plugs!   This is an excellent playbook and how-to guide on building local networks and ecosystems to help people start and grow new ventures.  Easy to read and full of great tips and insights.
  • Harold Wolman, Howard Wial, Travis St. Clair and Ned Hill. Coping with Adversity:  Regional Economic Resilience and Public PolicyI’ve plugged this one before as well, but again, it deserves the attention. This is a comprehensive look at how communities deal with economic shocks, such as a major plant closure.  They find that the most resilient communities share a number of characteristics:  they are home to a better educated workforce, enjoy more industry diversity among their export oriented sectors, and provide a perceived business-friendly climate.
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