I’ve long written and spoken about the important role of independent and gig economy workers as part of a region’s core base of entrepreneurs. While many of these workers are simply pursuing additional income, a large share are building businesses too. Yet, for a variety of reasons, they may not show up in the data, and thus we don’t fully understand their potential impacts on local economies. A new National Bureau of Economic Research paper offers a good look at these impacts. “Launching with a Parachute” investigates how the introduction of gig economy platforms affects business startup rates. (The researchers use the excellent Startup Cartography Project for their data. Check the project website for other useful work as well.) They find that the introduction of the gig economy to a community increases the local startup rate by around five percent, and also increases local lending to new businesses. The authors suggest that supplemental income from gig economy work offers “insurance” and additional resources that provide a “parachute” for those considering business startup. In effect, the gig economy work provides income and perhaps a test bed for business ideas and concepts too. The authors also find that these effects on startup rates are most pronounced in areas with lower incomes and higher credit constraints. As we continue to slog our way out of the current economic crisis, we may find that gig work will have an even larger impact on future startup activity.
We’ve just produced a new issue of our regular e-newsletter, EntreWorks Insights,. This issue offers suggestions for community talent attraction strategies as the worst effects of the COVID-19 pandemic weaken. We welcome your input and ideas! You can also subscribe to our newsletters here.
I’ve developed something of a tongue-in-cheek “formula” for what communities should consider doing to help spur recovery after the pandemic: T + I + E + BRE = R. Communities that invest in Talent, Infrastructure, Entrepreneurship, and enhanced Business Retention & Expansion programs will likely have the best potential for economic Recovery. If you want to learn more about the E in this recovery equation, you may be interested in an upcoming training opportunity from the International Economic Development Council. On June 18 and 19, I’ll be co-teaching an on-line version of IEDC’s Entrepreneurship and Small Business Development course on-line. My co-presenters will be Carol Lauffer of Business Cluster Development LLC and Tom O’Neal of GROW Florida. This course also provides credit toward IEDC’s Certified Economic Developer credential. Hope you can join us. (FYI—I’ll also be teaching a similar version of this class for the North Carolina Basic Economic Development Course in early August. Watch this space for further details.)
Our shambolic response to COVID-19 presents us with many bitter and painful lessons. One set relates to scenario planning. We’re obviously not very good at it, and, when we actually do advance scenario planning, we ignore the results. It probably behooves us—or at least those of us working in community development—to take a look at a useful new Lincoln Institute of Land Policy book, Scenario Planning for Cities and Regions, by Robert Goodspeed. This excellent guide is something of a one-stop-shop on scenario planning. I know a little about scenario planning processes, but I learned a lot here and was also reminded of many good ideas and techniques that I’ve forgotten over the years. I expect that I’ll use it regularly as a future reference guide—it would also be useful for student and newcomers to the field. It’s also an easy read, and relatively jargon-free—at least for us policy wonks! It’s well worth reading.
On Tuesday, I led a National Association of Development Organizations webinar on the topic of “The Long and Winding Road to Economic Recovery.” A recording of that session, and copy of my presentation, is now available here. Please be forewarned of an audio glitch (from minute 41:30 to 43.10). My presentation made a big pitch about investing in infrastructure, especially broadband, and lo-and-behold, my power at home went out at this point in the event. I quickly rebooted, but I guess I made the case–unintentionally!! I welcome your feedback on these thoughts and ideas. Thanks to NADO for supporting this work.
I remain convinced that our post-COVID world will place a heavier emphasis on local ownership and local connections. I’m excited about these prospects, but also realistically concerned about how we’ll pay for this at the local level. Outside support, from revised and expanded state and federal programs, will likely be part of the puzzle, but the real solutions will need to begin at home. And, we’ll need money to support local business and other locally-focused initiatives.
These thoughts led me to dust off an early 2020 report that has been on my “to-read” list for a while: Community Investment Funds: A How-To Guide for Building Local Wealth, Equity, and Justice. This work, from the National Coalition for Community Capital, is an excellent introduction to the budding field of local investment funds. The report profiles a number of new-ish funds, such as the Vermont Community Loan Fund and the Boston Ujima Fund, that are testing new models that use the investments of local people to build community. The report also includes a useful how-to guide on the legal and regulatory steps required to establish these funds. A quick summary? This is not an easy task, and we’re still learning about what works. But, these interesting experiments deserve greater attention, and, hopefully, more communities will develop these funds and create an effective roadmap for future success.
I’ve had the pleasure of working for many years on economic resilience and recovery projects with my colleagues at the National Association of Development Organizations (NADO). This work has dealt with lots of economic shocks such as factory closings, military base closings, and natural disasters. Now, we hope to use lessons learned from this work to support COVID-19-related economic recovery. I’ll be talking about this work in an upcoming webinar entitled “The Long and Winding Road to Economic Recovery.” The COVID-19 crisis is unprecedented, so we certainly don’t have all of the answers. But, there are some useful lessons from past experience with economic resilience and recovery efforts. We’ll discuss how and whether to apply them to COVID-19 recovery efforts. If you’re interested in joining this discussion, you can learn more and register here. The event will be held next Tuesday May 19 at 2PM Eastern. Hope to see/hear you then!
We’ve learned a lot of lessons—most of them painful—during the current COVID-19 crisis. In the policy-making world, we’re certainly learning that we need to do a better job in developing, using, and sharing data, research, and analysis. While we’re now rightly focused on issues related to public health data, we also need to think about how to address other data challenges as we move toward economic recovery. The lack of good data on rural America is one pressing challenge that deserves more attention, and has rightly been called out in a new Aspen Institute report, “In Search of Good Rural Data: Measuring Rural Prosperity.” The report highlights a series of challenges that I deal with on a regular basis when EntreWorks is working in rural regions—the quality and availability of economic data is very poor. A variety of factors is at work—it’s hard to get representative samples in rural areas, some rural data is “suppressed” for privacy reasons, and we have varying definitions of what is rural. What this means is that, to a certain extent, we may be flying blind when trying to understand rural economies. We know a lot about economic trends in big cities, but less about what’s happening in smaller places. We know that good policy depends on good data, so if we want better rural policy, we need better rural data too. This report offers a number of very useful ideas on how to close this gap, and is well worth a look.
An interesting new on-line data set from Go Daddy takes a look at internet use by rural residents and rural entrepreneurs. Researchers are digging into this data and producing some interesting early results. For example, the data suggest that places with more active adoption of internet and denser concentrations of businesses with an on-line presence outperform other rural regions on many important economic measures. This is an interesting and very important set of findings. It adds further fuel to the case for major investments in broadband to ensure full access for all Americans—regardless of where they live or their economic circumstances. It also highlights the importance of adoption as opposed to simple access. Rural adoption rates for high-speed broadband are much lower than in other communities, even when broadband is available. And, many Main Street businesses still do not do business on-line. So, we need to make broadband available, but we also need to encourage people to use it and to use it regularly as part of their daily lives. Making this case will be certainly easier in the aftermath of the COVID-19 pandemic. (The Go Daddy data and related analysis are publicly available here.)
I would make one further point about this research—it also shows the importance of promoting traded businesses in your community. (Note: A traded business sells outside of your community and brings in money from other locations.) I would argue that an on-line presence suggests that a rural business is doing business outside of their home community, and is thus increasing the local store of wealth. A strong base of these businesses is going to improve local economic performance. So, the Go Daddy data results may reflect this combination of broadband use and a larger share of traded sector companies.
Some additional new research offers further evidence in support of this hypothesis. A new London School of Economics study looks at the role of entrepreneurship in combating urban poverty in the US. It finds that higher levels of urban entrepreneurship in traded sectors have strong impacts on reducing local poverty and increasing local incomes. High levels of entrepreneurship in non-traded sectors have much lesser positive effects.
So, what’s the lesson here? We need to support more entrepreneurs—in rural and urban settings. And, we need to focus especially on helping them do business outside of their home communities. That’s a recipe for local wealth creation in every type of community.
I’ve been trying to keep my pandemic era reading on the lighter side, but I couldn’t help myself and I picked up Midwest Futures after seeing it plugged in a James Fallows blog. I can highly recommend this interesting and idiosyncratic book. It’s a combination of history, memoir, and critique of the Midwest region, along with some ideas on future trends and regional prospects. I enjoyed learning about the initial development of the region with a heavy emphasis on the development of the railroads and mass-scale agriculture. It’s not a pretty story, with massive displacement of Native peoples and a general disregard for the plight of the poor and dispossessed. The author, Phil Christman, is highly critical, but also shows his love of his home region, warts and all. His thoughts on the region’s future directions, in the face of climate change (and now COVID 19) are also worth considering.
Let me also add another early plug for new E-book from the folks at VOX EU and the Centre for Economic and Policy Research: Mitigating the COVID 19 Economic Crisis: Act Fast and Do Whatever It Takes. This book offers a very early but useful assessment on what will be needed to recover from our current economic mess. It includes chapters from around the world and from renowned economists like Paul Krugman. The title says it all. We need to keep investing and as the title says, “do whatever it takes.” All of the chapters are early takes on what we’ll need to do, but they offer some excellent ideas from around the globe.