Economic Diversification in Coal Country

As governments around the world struggle with combatting climate change, the coal industry is facing a hard reckoning.   As the coal industry downsizes, nearby communities are being hard hit and need to find ways to replace lost jobs or identify new economic engines.  If your community is facing economic challenges due to the loss of mining jobs or reduced activities at local utility facilities, you might consider applying for the Coal Reliant Communities Innovation Challenge.  This project supported, by the National Association of Counties and the National Association of Development Organizations, provides technical assistance and peer networking for community leaders seeking to diversify their local economies from a current heavy dependence on the coal industry.  (Note:  EntreWorks Consulting is helping to facilitate these training sessions).

The first session of the Coal Region Innovation Challenge program was held in Pikeville, KY in April and a second session is planned for September 16-18 in Grand Junction, CO.  The final session will be held November 18-20 in Charleston, WV and the application process for this final session is now open.  You can learn more about the project and the application procedures here.   If you are facing local job loss due to cutbacks in the coal industry, do consider applying.  This is a great opportunity to get access to leading experts and to learn about what other communities are doing to support economic diversification.  The deadline for applications is September 23, 2015.

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A Rethink for Social Impact Bonds?

Social impact bonds burst onto the policy scene and seemed to many (including me) to be the greatest thing since sliced bread.  (Here’s my take from 2012).   As a refresher, social impact bonds are a new public-private financing tool where private investors support a program initiative and reap a return (or not) based on program performance.  (For background on this tool, click here.)  Social impact bonds were first used in the UK, and, in the US, were first deployed on a large scale in New York City.  In both cases, bonds were used to fund programs seeking to reduce recidivism among ex-offenders.

These heavily-touted pilot projects—in Peterborough UK and New York’s Rikers Island—have now completed their first phases and the early returns aren’t great.  As a recent Governing magazine piece notes, both projects failed to meet their performance targets and failed to provide early repayments to investors.   In the New York case, the program is being shut down.

What can we make of these sobering results?  They are likely to reduce enthusiasm for social impact bonds, but it’s important that we avoid overreaction.  It’s not as if a new finance tool would make it miraculously easier to reduce ex-offender recidivism.  It’s still a tough job—even with extensive resources.   Let’s hope that these early pilots generate some rethinking about how to effectively use social impact bonds and how to design programs that can have significant impacts that benefit investors, but more importantly, benefit people in need.

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Entrepreneur Networks for All

Over the past year, the Paris-based OECD and its unit on Local Economic and Employment Development (LEED) have produced a very useful series of guides on “inclusive entrepreneurship.”  For OECD, “inclusive entrepreneurship” refers to business support strategies that focus on “non-mainstream” populations which might include youth, the under-or unemployed, immigrants, and minority residents.   The guides focus on European examples, but are of course relevant for many different types of societies and economies.   The series includes guides on youth and senior citizen entrepreneurship, entrepreneurship for people with disabilities, and strategies for financing inclusive entrepreneurship.  I’ve been particularly impressed with the latest guide on “Expanding Networks for Inclusive Entrepreneurship.”    We know that these entrepreneur networks are deemed vital for business success, and that innovative regions like Silicon Valley are home to dozens of such organization.  Yet, creating and sustaining these networks in poorer or less populated regions can be a challenge.  The new LEED guide offers some useful guidance on how to address and hopefully overcome these obstacles.  It also includes great mini-case studies of successful efforts from across Europe.

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Student Loan Debt & The Start-up Slump

As I’ve noted in past posts, America has been in something of a start-up slump for some time.    The trends seem to be turning, but it’s still important to understand why our start-up rates have slowed in recent years.  A related mystery is why millennials have been so start-up averse.   Compared to previous generations, millennials are starting firms at much lower rates and make up a smaller relative share of small business owners.   There are a number of theories behind the start-up slump, but we have long suspected that growing student loan debt must be a factor.   Thanks to new research from the Philadelphia Federal Reserve, we now know that this impact is quite sizable.  The study, The Impact of Student Loan Debt on Small Business Formation (WP 15-26), examines business start-up rates between 2000 and 2010, and finds that growing student loan debt may account for as much as 14% decline in the number of new small businesses with 1-4 employees.

In many ways, this result should not be surprising.   But, as the authors note, student loan debt has particularly pernicious effects when compared to other kinds of debt.   Not only does student loan debt make it hard to get started in business, it also makes it hard to access other forms of credit.   Because budding entrepreneurs cannot eliminate student loan debt via bankruptcy, they start firms with a pronounced financial disadvantage.  They have to pay off old debts, while also facing tight constraints on their ability to access growth capital—via bank loan or credit cards—as well.  No wonder they choose  to pursue other options.  These results suggest that new policies to deal with student loan debt have to be in the mix if we truly want to spur more start-up activity.

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Food Hubs: What Works?


Lately, I’ve been working on a number of projects that have touched upon food systems, food hubs, and food-related manufacturing.  As such, I’ve been doing a lot of reading and researching on the topic, and, as always, also doing my best to eat a lot of interesting and delicious food.   This is a booming research field and it’s nearly impossible to keep up with the latest research and newest resources for community leaders with an interest in creating a local food hub or in nurturing a local food-related cluster.   Here a few excellent and, in most cases, very new resources that are worth a look:

1)      Food Hub Benchmarking Study:  I have found Winrock International’s Wallace Center to be one of the best sources of the latest thinking on food hubs and food systems.   Their latest and greatest is a comprehensive food hub study that benchmarks 300 U.S.-based food hubs with hard data on costs and income, organizational structure, sources of revenue, customer categories, and the like.  If you want to understand the industry or start a food hub yourself, go here first.

2)      Running a Food Hub:  This is a new study from the US Department of Agriculture that again offers excellent real-life tips and guidelines, along with detailed case studies of eleven food hub programs operating around the US.

3)      Other Case Studies:  FutureEconomy is a interesting website that not surprisingly looks at issues related to our future economy.  In addition to great writing on many cool topics, it also has many interesting case studies including assessments of CSA programs in Massachusetts and a study of food hub development and impacts in Vermont.

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Home Sweet Home: The Power of Local Retail

Since most of you are unlikely to regularly read Hardware Retailing (the North American Retail Hardware Association’s journal), I know that I’m doing a real service by sharing a new report that compares the impact of local hardware stores vs. big box retailers.  The study, “Home Sweet Home,” compares local economic impacts across several categories:  labor costs, profits, procurement, and local charitable giving.  The study was undertaken by independent business advocates so the results should not be totally surprising.  Nonetheless, the differences between the impacts of big box vs. local retailers are quite pronounced.

The core analysis focuses on a hypothetical but large home renovation project, valued at $10,000.  If all of the products and materials for this project are purchased from local retailers, they can recirculate as much as $2,298 in the local economy.  This total is nearly double the spin off benefits from purchases at large retailers (averaging about $1,164).   The study also reminds readers—and shoppers—that stores like Ace and True Value are locally owned franchises, even though they often supported by national ad campaigns. This is yet more fuel to support the power of local retail as an important economic engine.

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The Sharing Economy in Europe and the US

With the rise of Uber and other sharing economy ventures, policy makers in Europe and here in the US are assessing how best to respond to the disruption and innovation generated by these new companies.   I’m seeing an interesting dichotomy between what’s happening in Europe and what’s happening here at home. Interestingly, these differing approaches reflect larger perspectives on innovation and what constitutes a good society.   Let’s start in Europe where much of the current discussion concerns protection of incumbents—especially in the taxi industry.  This includes violent protests in Paris and the recent arrest of Paris-based Uber executives.  Beyond these intra-industry squabbles (also present here in the US, of course), European regulators are primarily consumed with how these new innovations can be rolled out in heavily fragmented set of distinct national markets.   It’s all about removing regulatory barriers so innovations can scale up.

Here in the US, regulatory bottlenecks do exist, but they don’t seem to be the biggest challenge around the sharing economy.  Here, the big challenge concerns fairness and equity for workers and entrepreneurs operating in the sharing economy.   What kind of benefits or safety net will be available for this new and growing share of the workforce?  This has been the dominant theme coming from recent interviews with Sen. Mark Warner (D-VA), who, as we have noted in earlier blogs, has been a leader in starting policy debates on the gig economy and its implications.

If the sharing economy is going to work for everyone, both Americans and Europeans need to get it right.  We need to open new market opportunities, but we also need to be sure that this new workforce can find career options that are exciting, rewarding, and more secure.

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Some Good News on Business Incentives

While I am not a huge of fan of business attraction incentives, I also recognize that they are often a necessary evil in today’s economic development landscape.   But, if we’re going to do incentives, let’s do them right—in a transparent fashion that allows taxpayer dollars to be tracked and assessed and which requires firms to meet clear performance targets.   This position used to be something of an outlier, largely found in vigilant watchdog groups like Good Jobs First.  More recently, this focus on accountability and transparency is becoming more mainstream.  Last week, the International Economic Development Council released the third report in a series on 21st century incentives—in addition to describing the current state of the art, the studies place great emphasis on how best to evaluate incentives to ensure a maximum return on investment to the taxpayer. (Note:  the report is free to IEDC members, but requires purchase for others).   Meanwhile, the Council for Community Economic Research continues to do a yeoman’s job in tracking the extent and impact of state incentive programs via its State Business Incentives Database.  The database’s newest feature is a series of deeper dives into various states, with a focus on how program impacts are tracked and evaluated.  At present, seven state reports have been completed and more are on the way.  Last but not least, the Pew Business Incentives Initiative is continuing its work to share leading practices and to provide technical assistance and training to state and local officials around the country. (Disclosure:  I am a consultant to this project.)  One other good source on smart incentives comes from my colleague Ellen Harpel and her aptly named blog:  Smart Incentives.   All of these efforts suggest that the incentives business will (hopefully) continue to become more accountable to taxpayers and better linked to real and sustainable economic development outcomes.

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You Can Go Home Again, Especially with Kids

“Brain drain” remains one of the biggest concerns facing America’s rural regions.  For decades, the “best and brightest” of rural America have left their homes for the bright lights of the big city.  In response, many small towns and states have pursued strategies to stem brain drain and encourage rural residents to consider remaining in their hometowns.   A new study from the US Department of Agriculture’s Economic Research Service takes a new look at the “brain drain” issue and offers a more nuanced look at the challenges facing depopulating rural regions.

The researchers sought to understand what made people leave and/or return to their rural hometowns.  They undertook the research by attending high school reunions where they could interview people who had stayed, left, or returned to their home communities.  The results aren’t totally surprising—very few single and footloose twenty-somethings have strong interest in returning to their rural roots.  However, when they marry and start to raise a family, this calculus changes and return is more likely.

The basic calculus for potential return rural migrants is simple:  they know that they will benefit from closer connections to family and long-time friends, but also expect that they will make career and income sacrifices.  As they say, there is no free lunch.  Returnees typically waited until a good job opened up, or just decided to “bite the bullet” and create their own career or employment opportunities.

One final interesting finding underlines the importance of returnees to the health of rural America.   When they leave for the city, “the best and the brightest” leave a void in their hometowns.  But, when they return, they bring families who fill schools, purchase local goods and services, and invest in their regions.  They also bring new skills and talents developed in the early parts of their careers, assuming community leadership positions and helping to build a better place.  This further suggests that rural regions should move to a more sophisticated strategy that moves beyond bemoaning brain drain and instead focuses on how best to sell their regions to the large base of potential thirty-something returnees.

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Benchmarking Innovation Training in Portland, OR

If you’re interested in benchmarking your region’s innovation capacities, you should consider joining me next week in Portland, OR, where I’ll be teaching a class on Benchmarking Innovation and Entrepreneurship.  The course, which I’m offering with my colleagues, Brian Kelsey of Civic Analytics and Arnobio Morelix of the Kauffman Foundation, is being sponsored by the Council for Community Economic Research (C2ER) and is being held on Tuesday June 9 in conjunction with their annual conference.  We’ll be covering a host of topics from Benchmarking 101 to a review of the latest data and metrics on how to understand your community’s innovation economy.  We’ll be looking at data but also examining the real world challenges of turning that data into a compelling story that motivates people to take action.   If you’re interested in learning more, you can contact me or sign up at C2ER’s website.  Hope you can join us!

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