If you’re interested in learning the basics of entrepreneurship-driven economic development, have I got a deal for you! Come join us in Baltimore on June 23-24, 2016, where I will be teaching the International Economic Development Council’s Entrepreneurship and Small Business Development course. (You can learn more and register here). This is a basic level introduction that is also part of the professional certification process for economic developers. If you can’t make it to Baltimore, you’ll have another chance in late July when I’ll be presenting similar material as part of the University of North Carolina’s Basic Economic Development Course. This training takes place in Chapel Hill, NC during the week of July 25, 2016. Hope to see you there!
There has been a lot of interesting work related to entrepreneurship in the past few months. Here’s a few that piqued my interest:
- Traction by Gabriel Weinberg and Justin Mares: There’s no shortage of how to guides for entrepreneurs these days, but many of them forget the real secret to success: getting people to pay you for something. Finding and keeping customers is one of the toughest challenges for any entrepreneur, and this book offers some great practice guidance on this front.
- “A New View of the Skew:” This MIT research offers some optimistic news about the state of American entrepreneurship. Numerous studies have shown a slowdown in US entrepreneurial activity, but this new research finds that the performance of high-growth start-ups has been improving since 2010.
- Time for Social Insurance? A new Kauffman Foundation brief examines how US social policies—namely a weak social safety net—impede entrepreneurship. Expanded social insurance programs, such as better, cheaper health care and more robust unemployment assistance, could actually help spur more people to consider entrepreneurship.
- Small Business Credit Survey 2015: The seven Federal Reserve Banks have released their annual survey of small business credit. Conditions are improving, but more than half of small firms still report that they have financing issues. Small banks remain the lender of choice. On-line lending is growing and was used by 20% of firms. But, most don’t seem to like it and customer satisfaction rates are very low.
- What About the Kids?: Finland regularly tops the global charts for best educational systems. They are now pioneering new approaches to youth entrepreneurship. Check out what’s happening with their “Me and My City” program focused on 12 year old budding entrepreneurs.
I’ve been doing a fair number of blog posts on EntreWorks Consulting’s ongoing work supporting economic diversification in coal-reliant communities. For the past 18 months, a lot of this work occurred under the auspices of the Coal Reliant Communities Innovation Challenge, a joint effort of the National Association of Counties, National Association of Development Organizations, and the US Economic Development Administration. This effort has been getting a lot of attention recently. The latest, which is worth a read, comes from the Smart Growth Network, which offers a great summary of the project and some early results from Harlan County (KY) and Rio Blanco County (CO). Watch this space for future updates!
It’s no big news to note that the local foods movement is booming across the US. That’s a very good thing as local foods improve our health, reduce carbon footprints, and generally improve the quality of life for both producers and consumers. They also help the bottom line according to new research from the US Department of Agriculture’s Economic Research Service. The study look at the growth in direct to consumer (DTC) agriculture sectors between 2007 and 2012, and found that farms with DTC sales had much higher business survival rates than their traditional counterparts. In fact, DTC sales improved a farm’s survival rate by anywhere from 6-10 percent. This may not sound like a whopping difference, but its impacts are significant as farms face regular and substantial fluctuations in annual income. As a result, failure rates can be quite high. In general, the researchers find that farms with DTC sales are more stable. They see less pronounced fluctuations in income, but they also show slightly lower growth rates over time. This probably results from the fact that DTC sales can be very labor intensive, perhaps limiting the farm’s capacity to sustain rapid growth rates.
As an article in today’s Wall Street Journal notes, China’s economy is beginning to look like America’s economy in a number of ways. One of the less desired similarities is the rise of a two-tiered (or two-speed) regional breakdown, where some regions, like Shenzen, boom and prosper, and other regions, like Fushun in China’s industrial northeast, face stagnation and decline. These regional disparities are likely to get worse as many Chinese regions face daunting transition challenges moving away from reliance on coal or heavy industries like steel. A number of recent studies have examined similar regional disparities here in the US. For example, the National Association of Counties has found many parts of the US have grown and are now “fully recovered” from the impacts of the Great Recession. However, roughly 16% of US counties have shown little or no recovery since then. Similarly, the 2016 Distressed Communities Index finds huge performance differences between America’s most prosperous and distressed zip codes. In prosperous communities, employment jumped by 22% between 2009 and 2013, and the number of establishments climbed 11 percent. Among the distressed areas, job losses averaged 13% and one in ten businesses shut down. It’s certainly no consolation to see these big regional disparities at home and abroad, but it should again remind us that we have all work to do.
My firm works across the US so I have a decent amount of hard-earned experience with the good and bad (hello New York!) of state procurement rules and regulations. So, I was very pleased to see a new series from the Governing Institute that assesses and ranks states for the quality and user-friendliness of their procurement practices. The study, the first in an ongoing series, ranks states on a number of factors including the use of technology, contract administration, information technology procurement, and workforce training and quality. The researchers kindly refrain from noting the worst performers, but they do rank the best. They find that Georgia tops the list, followed by Virginia, Minnesota, Utah, Massachusetts, and Ohio. What do these states do better? For one, they got an early start and have been aggressively modernizing their systems for at least a decade. In addition, they have strong leaders who view procurement as a means to achieve the state’s policy goals, not just as an enforcement weapon or as a means to manage contracts.
I applaud the Governing team for this good work and look forward to the rest of the series. As they look forward, I encourage them to also look more deeply at the idea of demand driven innovation where states can use the power of procurement to promote innovation, purchase more cutting edge products and services, and engage new types of partners and suppliers. The Governing survey does ask whether states do special outreach and training for small and disadvantaged business—it finds that 78% of state agencies do so. But, it would also be instructive to see what other steps are being done to use the power of the state purse to develop more innovative state economies.
Over the last year or so, we have been inundated with news stories about the labor market impacts of Uber, AirBnB, and other sharing economy sites. A new series of studies from the JP Morgan Chase Institute take another look at the issues. These researchers have been doing a very useful study of income volatility in the US, and, not surprisingly, they find that it is a growing problem for much of the population. Overall, 55% of Americans experience monthly income fluctuations that represent at least 30% of income.
Their latest study looks at whether on-line work platforms, like Uber, can serve as a tool to help people better manage big monthly or weekly income fluctuations. In other words, could this new income from online platforms close the gap? At this point, the answer appears to be no. The researchers did a massive review of JP Morgan customer data (28 million people) and found that, in a given month, only 1% of people had received any income via an on-line platform. The growth in usage has been high, but the absolute numbers of those who earn via on-line platforms remains tiny. The research shows that use of the platforms is sporadic and generally provides very limited secondary income to most users. And, platform usage also seems to drop over time, suggesting that users may have some reservations about the model.
This is an excellent study that is well worth reading. It also reminds us that, when studying the 1099 Economy, we need to avoid missing the forest for the trees. Our current public fixation on the Ubers of the world may distract us from focusing on the structural factors that lead to new ways of doing work. The 1099 Economy was an important and growing force long before the on-line gig economy arose. As the study noted, 1% of workers now use these platforms. Let’s not forget the other 99%!
My blog is not well known for its theater reviews, but I’m taking a shot today. Last night, we saw Sweat at Washington’s Arena Stage, and I can highly recommend it. It’s a searing look at what happens to a community when plants close and jobs vanish. The play is set in Reading, PA (my hometown), and it’s not a very flattering portrait. But, it is realistic and shows the many disasters that can befall good people when good jobs disappear. Most of the play is set in a local bar, jumping between 2000 (when the local plant first downsized) and 2008, when nearly all of the main characters are unemployed and untethered. Over the course of the play, the tight-knit community breaks down—triggering racial tension, substance abuse, and a heinous crime as well. At this time of raging anger on the campaign trail, the stories in Sweat will resonate. They should also remind us why the work of community economic development remains so important and vital.
Here are links to reviews and critiques from my qualified sources in the NY Times, the Washington Post, and NPR. If Sweat comes to your town, go see it!
I grew up in Pennsylvania and I’m a Pittsburgh Steelers fan, so I’ll admit my bias: I think that Pittsburgh’s recent history—from industrial decline to partial revitalization as an “eds and meds” center, offers great lessons learned for many U.S. regions. Thus, I was already pre-disposed to like the new regional history Beyond Rust: Metropolitan Pittsburgh and the Fate of Industrial America. This in-depth, but very readable, history takes a deep dive into Pittsburgh’s economic history from the 1700s up to today. Most of the book examines the massive transformations of the 20th century using a regional lens that doesn’t just look at the City of Pittsburgh, but the wider regional economy as well. This broader lens brings in other regional centers like Steubenville and Barnesville (OH), and Weirton and Wheeling (WV). The book is dense with historical details, but a couple of interesting themes stand out:
- The Good Old Days Weren’t Really that Good: When I lived in Pittsburgh in the dark days of the 1980s, I always wondered what it was like when steel was king. It ends up that it wasn’t really that great in many ways. Beyond the pollution, the local steel industry struggled through much of the 20th century and its decline can really be traced back to the 1920s.
- Mixed Record for PPPs: While they didn’t use the term public-private partnerships, much of Pittsburgh’s post-WWII economic development was led by PPPs. This produced some good results, like cutbacks in local air pollution and the development of higher ed resources. But, it also produced some disastrous outcomes, like the razing of parts of Pittsburgh’s Hill District and the displacement of thousands of African American residents.
- Regional Context Matters: The book’s focus on other regional centers, like Wheeling, was very interesting. The regional steel economy was regional in nature, and, sadly the recovery has not been affected all parts of the region. While parts of the City of Pittsburgh are thriving, many of the former steel centers, like McKeesport, Weirton, Aliquippa, and Steubenville, still face seemingly insurmountable economic development challenges.
While Beyond Rust may be too Pittsburgh-centric for some readers, it’s an excellent study of the regional economy and, in a broader sense, the various waves of economic development strategies that have been used in Pittsburgh and across the U.S.
As a strong advocate for entrepreneur-driven economic development, I’m also an avid supporter of entrepreneurship education. We have reams of evidence—from groups like the Network for Teaching Entrepreneurship–that youth entrepreneurship education helps kids become better students, better workers, and, of course, better entrepreneurs. Thus, it’s a bit sobering and depressing to read the latest Survey of the States 2016 from the Council for Economic Education. The annual CEE survey assesses state policies toward economics and personal finance education. It finds that only 20 states now require high school students to take a class in economics, and only 17 states require coursework in personal finance. As a related 2015 Junior Achievement study shows, the state of entrepreneurship education is even more tenuous. At present, eighteen states require that entrepreneurship course be offered, but these are not prerequisites for graduation. (In many of these states, entrepreneurship education standards exist but are not actively promoted or deployed.) The CEE study highlights Virginia as good example of how states might embrace personal finance education—the Commonwealth requires all high schoolers to take one full credit course in economics or personal finance. These reports suggest that we will need to continue pushing to ensure that American high school students can get access to the economics and entrepreneurship training they need and deserve.