Newsletter – Entreworks Insights

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 21, Number 2

August 2024

HIGHLIGHTS:     Crowdfunding: What’s Working? What’s Next?  

                             What’s New at EntreWorks Consulting?

Crowdfunding:  What’s Working?  What’s Next?

Let me take you back to the calmer, less stressful, days of April 2012. Justin Bieber’s “Boyfriend” was the top song, and “Hunger Games” topped the film charts. Politically, President Obama was preparing for a re-election contest against Mitt Romney.  High on his policy agenda was the 2012 Jumpstart our Business Startups (JOBS) Act, which, among other things, eased the way for equity crowdfunding in the US.

At the time, many observers predicted that crowdfunding might transform the business finance landscape. While a business finance revolution did not occur, crowdfunding has emerged as an important part of the small business support landscape. Data from Florida Atlantic University’s Equity Crowdfunding Tracker shows a large jump in crowdfunding since 2016, when many of the first crowdfunding regulations were finally in place.  In 2016, the US saw 188 regulated business crowdfunding campaigns that raised around $25 million.  In 2022, these figures jumped to 1,577 campaigns that raised more than $417 million.  Today, crowdfunding remains a niche tool for business finance, but it appears to be a viable option for many entrepreneurs—especially minority or women business owners who may face higher barriers to accessing traditional business investments.

What is Crowdfunding and How Does It Work?

The origins of crowdfunding can be traced back to the 1990s, but the industry took off after 2016, as new federal regulations came into effect. The industry has boomed since then, even with slight drops in post-pandemic activity tied to higher interest rates.

Most regulation crowdfunding occurs via leading platforms such as WeFunder, StartEngine, and Honeycomb.  These funds in turn invest in a diverse mix of businesses, with a heavy focus on Main Street businesses operating in sectors like restaurants, hospitality, media, business services, and consumer products. Around half of backed firms are young (under 3 years of age, with a median valuation of around $8.5 million. This figure is akin to the valuation levels found for early venture capital (VC) investments, and slightly higher than many initial angel investments.  These trends suggest that crowdfunding may now be able to effectively compete with other small business funding sources.

Crowdfunding’s biggest impacts may relate to the nature of firms funded in this fashion.  Women and minority-owned companies are more likely to succeed in raising funds via crowdfunding, when compared to other sources such as VC investments. Significant funding gaps still exist, but crowdfunding does seem to have some impact in diversifying the base of company founders.

As crowdfunding for business has grown, the field has also diversified, producing lots of interesting models for investing community capital. (Here’s a useful guide from the National Coalition for Community Capital.   You can also learn more from the Crowdfunding Professionals Association).

Many community development organizations embrace crowdfunding as a tool to fund business, community projects, and entire communities too. Most community crowdfunding sites opt for simpler tools that avoid the regulatory complexities found with the types of regulation crowdfunding noted above.  But, some very interesting models are underway. These efforts use various approaches, such as rewards-based crowdfunding, where firms provide goods or services to investors, or types of investment crowdfunding that do not require the intense regulatory scrutiny that accompanies pure regulation crowdfunding. 

Here are a few examples worth learning about:

Many states and localities are embracing crowdfunding as a tool to match funds for community projects.  Vermont is a national leader on this front, via the Better Places initiative. Using the Patronicity platform, Better Places allows Vermont communities to access outside funds for community placemaking projects, such as trails, skateparks, and community makerspaces.  Participating communities receive technical assistance along with a 2:1 matching grant from the state of Vermont.  Since the program started, it has backed 52 projects which have attracted nearly $700,000 in local investment, along with around $1.25 million in state funds.  Thanks to this platform, Vermont communities have funded a local maker space (Springfield), downtown street art (Brattleboro), and a local music festival (Hardwick). Many other states also offer similar programs using the Patronicity platform; this list includes Connecticut, Indiana, and Michigan, among others.

Other platforms, such as Small Change, tap crowdfunding to support real estate development. This tool has been used to support minority real estate developers, who often face challenges in accessing outside financing. Small Change has helped back projects, such as affordable housing, shopping centers, and community spaces, around the US. In Philadelphia, El Centro Home is currently using the platform to fund conversion of an old warehouse into a community workforce training center.

Finally, I’ve been very intrigued with how some small business support organizations are using crowdfunding tools as a supplement to their existing programs and investing platforms. Beginning in 2014,the Wisconsin Women’s Business Initiative Corporation (WWBIC) has partnered with Kiva, a global microlending platform to support the provision of “nano-loans” (ranging from $1,000 to $15,000) funding via the KIVA crowdfunding platform.  This tool offers a means to help new entrepreneurs access early-stage funding and prepares them to successfully compete for additional financing from both public and private sources.  Over time, this partnership has supported more than $3 million in micro-lending activity across Wisconsin, with an average loan size of around $6000.  Beginning in 2023, the Wisconsin  Economic Development Corporation also offered its support, by providing a one-to-one match (up to $5000) to Wisconsin entrepreneurs who raise funds via Kiva. This model, pioneered in Wisconsin, is now being deployed in other US sites, with Kiva Hubs operating in 30 states.

Why is Crowdfunding Relevant to Economic Development?

As these examples suggest, crowdfunding offers a set of tools that can help economic developers to build local businesses and invest in community assets.  Crowdfunding is not a panacea:  it takes a lot of time and resources to raise funds, the business model for some funds may be questionable, and the crowdfunding model may not be relevant for all types of businesses and communities. Yet, it does offer hope, especially for early startup founders who cannot access traditional funding sources.  It also offers hope for communities who may lack the resources to win big federal grant competitions and other outside funds.  Crowdfunding is one tool to help these places invest in themselves.

So, what does this mean for economic developers out in the field?  At a minimum, they should assess whether crowdfunding is a tool with relevance for their communities.  These programs can provide needed funding to underserved entrepreneurs, and can be a great resource to fund smaller community projects like parks, trails, and building updates.  Regardless of who prevails in our upcoming elections, the flow of Federal dollars from Washington is likely to slow.  As such, we all need to be aggressive and creative in seeking out and using new tools for funding specific projects and our regular day to day activities.  Crowdfunding can help on this front.

We also need to advocate for changes to current crowdfunding rules and regulations.  The industry is facing some challenges, with many crowdfunding platforms facing funding and political headwinds. For example, MainVest, one of the early sites, recently shut down quite abruptly.

Going forward, we need to streamline current regulations related to crowdfunding—you can find some useful ideas from the Crowdfunding Professionals Association here.   That’s one step, but, in general, we need to do more to encourage the development of all sorts of community capital sources, from foundations to local funding pools to crowdfunding to many other sources as well.  If you want to learn more about other community investment options, here are a few organizations that can serve as good resources to get started.

American Independent Business AllianceLocal Investing Resource CenterLOCUS Impact InvestingNational Coalition For Community Capital

What’s New at EntreWorks Consulting?

We hope that you are having an enjoyable Summer and getting ready for the arrival of fall.  Here at EntreWorks Consulting, we remain focused on continued projects in Louisiana and Indiana, along with newer work for the Development District Association of Appalachia and the US Department of Defense.   You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  Recent topics include the linkages between economic resilience and entrepreneurship, our ongoing energy transition, and trends in self-employment. In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2024.

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 21, Number 2

August 2024

HIGHLIGHTS:     Crowdfunding: What’s Working? What’s Next?  

                             What’s New at EntreWorks Consulting?

Crowdfunding:  What’s Working?  What’s Next?

Let me take you back to the calmer, less stressful, days of April 2012. Justin Bieber’s “Boyfriend” was the top song, and “Hunger Games” topped the film charts. Politically, President Obama was preparing for a re-election contest against Mitt Romney.  High on his policy agenda was the 2012 Jumpstart our Business Startups (JOBS) Act, which, among other things, eased the way for equity crowdfunding in the US.

At the time, many observers predicted that crowdfunding might transform the business finance landscape. While a business finance revolution did not occur, crowdfunding has emerged as an important part of the small business support landscape. Data from Florida Atlantic University’s Equity Crowdfunding Tracker shows a large jump in crowdfunding since 2016, when many of the first crowdfunding regulations were finally in place.  In 2016, the US saw 188 regulated business crowdfunding campaigns that raised around $25 million.  In 2022, these figures jumped to 1,577 campaigns that raised more than $417 million.  Today, crowdfunding remains a niche tool for business finance, but it appears to be a viable option for many entrepreneurs—especially minority or women business owners who may face higher barriers to accessing traditional business investments.

What is Crowdfunding and How Does It Work?

The origins of crowdfunding can be traced back to the 1990s, but the industry took off after 2016, as new federal regulations came into effect. The industry has boomed since then, even with slight drops in post-pandemic activity tied to higher interest rates.

Most regulation crowdfunding occurs via leading platforms such as WeFunder, StartEngine, and Honeycomb.  These funds in turn invest in a diverse mix of businesses, with a heavy focus on Main Street businesses operating in sectors like restaurants, hospitality, media, business services, and consumer products. Around half of backed firms are young (under 3 years of age, with a median valuation of around $8.5 million. This figure is akin to the valuation levels found for early venture capital (VC) investments, and slightly higher than many initial angel investments.  These trends suggest that crowdfunding may now be able to effectively compete with other small business funding sources.

Crowdfunding’s biggest impacts may relate to the nature of firms funded in this fashion.  Women and minority-owned companies are more likely to succeed in raising funds via crowdfunding, when compared to other sources such as VC investments. Significant funding gaps still exist, but crowdfunding does seem to have some impact in diversifying the base of company founders.

As crowdfunding for business has grown, the field has also diversified, producing lots of interesting models for investing community capital. (Here’s a useful guide from the National Coalition for Community Capital.   You can also learn more from the Crowdfunding Professionals Association).

Many community development organizations embrace crowdfunding as a tool to fund business, community projects, and entire communities too. Most community crowdfunding sites opt for simpler tools that avoid the regulatory complexities found with the types of regulation crowdfunding noted above.  But, some very interesting models are underway. These efforts use various approaches, such as rewards-based crowdfunding, where firms provide goods or services to investors, or types of investment crowdfunding that do not require the intense regulatory scrutiny that accompanies pure regulation crowdfunding. 

Here are a few examples worth learning about:

Many states and localities are embracing crowdfunding as a tool to match funds for community projects.  Vermont is a national leader on this front, via the Better Places initiative. Using the Patronicity platform, Better Places allows Vermont communities to access outside funds for community placemaking projects, such as trails, skateparks, and community makerspaces.  Participating communities receive technical assistance along with a 2:1 matching grant from the state of Vermont.  Since the program started, it has backed 52 projects which have attracted nearly $700,000 in local investment, along with around $1.25 million in state funds.  Thanks to this platform, Vermont communities have funded a local maker space (Springfield), downtown street art (Brattleboro), and a local music festival (Hardwick). Many other states also offer similar programs using the Patronicity platform; this list includes Connecticut, Indiana, and Michigan, among others.

Other platforms, such as Small Change, tap crowdfunding to support real estate development. This tool has been used to support minority real estate developers, who often face challenges in accessing outside financing. Small Change has helped back projects, such as affordable housing, shopping centers, and community spaces, around the US. In Philadelphia, El Centro Home is currently using the platform to fund conversion of an old warehouse into a community workforce training center.

Finally, I’ve been very intrigued with how some small business support organizations are using crowdfunding tools as a supplement to their existing programs and investing platforms. Beginning in 2014,the Wisconsin Women’s Business Initiative Corporation (WWBIC) has partnered with Kiva, a global microlending platform to support the provision of “nano-loans” (ranging from $1,000 to $15,000) funding via the KIVA crowdfunding platform.  This tool offers a means to help new entrepreneurs access early-stage funding and prepares them to successfully compete for additional financing from both public and private sources.  Over time, this partnership has supported more than $3 million in micro-lending activity across Wisconsin, with an average loan size of around $6000.  Beginning in 2023, the Wisconsin  Economic Development Corporation also offered its support, by providing a one-to-one match (up to $5000) to Wisconsin entrepreneurs who raise funds via Kiva. This model, pioneered in Wisconsin, is now being deployed in other US sites, with Kiva Hubs operating in 30 states.

Why is Crowdfunding Relevant to Economic Development?

As these examples suggest, crowdfunding offers a set of tools that can help economic developers to build local businesses and invest in community assets.  Crowdfunding is not a panacea:  it takes a lot of time and resources to raise funds, the business model for some funds may be questionable, and the crowdfunding model may not be relevant for all types of businesses and communities. Yet, it does offer hope, especially for early startup founders who cannot access traditional funding sources.  It also offers hope for communities who may lack the resources to win big federal grant competitions and other outside funds.  Crowdfunding is one tool to help these places invest in themselves.

So, what does this mean for economic developers out in the field?  At a minimum, they should assess whether crowdfunding is a tool with relevance for their communities.  These programs can provide needed funding to underserved entrepreneurs, and can be a great resource to fund smaller community projects like parks, trails, and building updates.  Regardless of who prevails in our upcoming elections, the flow of Federal dollars from Washington is likely to slow.  As such, we all need to be aggressive and creative in seeking out and using new tools for funding specific projects and our regular day to day activities.  Crowdfunding can help on this front.

We also need to advocate for changes to current crowdfunding rules and regulations.  The industry is facing some challenges, with many crowdfunding platforms facing funding and political headwinds. For example, MainVest, one of the early sites, recently shut down quite abruptly.

Going forward, we need to streamline current regulations related to crowdfunding—you can find some useful ideas from the Crowdfunding Professionals Association here.   That’s one step, but, in general, we need to do more to encourage the development of all sorts of community capital sources, from foundations to local funding pools to crowdfunding to many other sources as well.  If you want to learn more about other community investment options, here are a few organizations that can serve as good resources to get started.

American Independent Business AllianceLocal Investing Resource CenterLOCUS Impact InvestingNational Coalition For Community Capital

What’s New at EntreWorks Consulting?

We hope that you are having an enjoyable Summer and getting ready for the arrival of fall.  Here at EntreWorks Consulting, we remain focused on continued projects in Louisiana and Indiana, along with newer work for the Development District Association of Appalachia and the US Department of Defense.   You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  Recent topics include the linkages between economic resilience and entrepreneurship, our ongoing energy transition, and trends in self-employment. In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2024.

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 21, Number 1

April 2024

HIGHLIGHTS:     Deep Tech: A New Wave of Innovation?

                             What’s New at EntreWorks Consulting?

Deep Tech:  A New Wave of Innovation?

Thanks to a recent consulting project, I’ve been digging into the latest trends in technology commercialization.   Not surprisingly, there’s a ton of interesting work underway across the US and around the globe. This issue of EntreWorks Insights shares some of what I’ve learned with a focus on the concept of deep tech and how deep tech’s emergence may transform how communities, governments, businesses, and research institutions support technology-based economic development.

What is Deep Tech?

Since we’re embracing technology in this issue of EntreWorks Insights, I opted to tap into artificial intelligence (AI) tools to get us started.  According to my Microsoft CoPilot,

Deep tech, also known as deep technology, refers to a category of organizations, often startups, that focus on developing innovations that surpass technological benchmarks and push the boundaries of current technology. These companies tackle substantial scientific or engineering challenges, aiming to provide solutions that have a significant impact on society.

That’s a good introduction as it highlights several key aspects of deep tech. Many sectors, such as AI, biotech, advanced materials, and quantum computing, can be classified as deep tech.  They all share a focus on grand challenges that require complex technologies, valuable intellectual property, and the potential for breakthrough innovations. 

From the standpoint of economic developers and community leaders, deep tech’s most important features may be that they require different ways of building businesses, supporting ecosystems, and bolstering the research and development process. Many of our current and newer tools to spur entrepreneurship and innovation, such as hackathons and the lean startup model, may not be as effective when we’re seeking to support and nurture deep tech startups. 

A new conception of the innovation process is also required.  The classic pipeline model, where ideas move in a straight pathway from lab to market, may have less relevance today.  Instead, we must recognize that innovation can come from anywhere and that the process of moving from lab to market is more complex than envisioned in the old pipeline metaphor.

Digging Deeper on Deep Tech

Businesses and institutions working in deep tech are seeking to do big things.  This is not about a new app or a cool new food concept.  Deep tech is about responding to deep challenges, such as climate change, curing cancer, advancing robotics, or building ethical AI systems.

These types of grand challenges exist everywhere, so many different businesses or technologies can be classified as deep tech.  Despite great diversity, they share key attributes.

They rely on world-class science and research.  PhDs are always involved! They are problem driven as opposed to being primarily technology or market-driven.  They seek the “best” solution as opposed to the most profitable solution.They are typically focused on developing physical products as opposed to new services or IT solutions.They operate at the intersection of various technologies and academic disciplines.They benefit from close collaboration between business, academia, and research labs.

Leaders around  the world are embracing deep tech. The European Union’s New European Innovation Agenda is focused almost exclusively on supporting deep tech innovation, with plans to invest as much as €70 billion in this portfolio over the next several years.  A review of the EU program portfolio gives a good indication of the diversity of deep tech:  51% of funds support health tech (cell and gene therapies, cancer treatment, medical device, and pharmaceutical manufacturing; 28% support digital industry and space (quantum computing, advanced materials, and advanced manufacturing); and 21% support cleantech, which includes ag/food, energy, and environmental technologies.

Because of the complexity of these technologies, firms cannot really be developed via the same pathways we’ve seen used in IT sectors.  Firms can’t “fail fast” when they are working in highly regulated industries where failure may lead to lost lives and other calamities.  The business development process will be more complicated, take more time, and follow a more focused and deliberate growth trajectory.

Startups in these fields will look different.  They can’t be started by a bunch of smart young people pulling all-nighters and living on ramen noodles.  They require more investment and more time to have impacts, and must have world-class research and technology expertise.  Research from the Boston Consulting Group suggests that deep tech startups typically require an investment of anywhere from $200,000 to $1 million, and two years of operation, to develop a prototype. They also estimate that the time between investment rounds for deep tech ventures may be 25-40% longer than found with more traditional tech ventures.  However, when deep tech investments succeed, the benefits can be profound.  To date, rates of return for deep tech are similar to other tech investments, but deep tech is beginning to generate significant new venture investing activity.  In fact, deep tech investments now account for about 20% of all VC investments, up 10%in the past decade.  Deep tech may offer unique potential to do well and do good, by solving societal challenges and generating strong returns as well.

Emerging Practices

Whether they embrace the term “deep tech” or not, many of the newest Federal technology based economic development programs are investing in these sectors.  Examples include the US Economic Development Administration’s Tech Hubs, the National Science Foundation’s Regional Innovation Engines, and industry specific efforts such as the Department of Energy’s Regional Clean Hydrogen Hubs and the Pentagon-backed Microelectronics Commons.  Most of these federal investments support regional consortia that engage higher education, business, and economic development organizations who are testing out a host of new strategies and programs. Similar types of initiatives are also underway around the world, in Europe, China, Japan, and in Latin America.   In Europe, the Copenhagen-based Deep Tech Alliance connects innovation partners from ten countries.

Because these new efforts support a host of different technologies, there is no single recipe for success. Completely new and revolutionary programs and tools are not always necessary.  Many of our traditional technology development tools, such as business accelerators, technology transfer offices, and STEM education, must be part of the deep tech program mix.  However, these efforts must recognize that supporting deep tech requires more money, more technical expertise, and more patience.

Supporting deep tech also requires strong and resilient ecosystems with active engagement from universities, corporations, and economic development organizations.   The playbook for these ecosystem partners will vary based on focus areas, local assets and gaps, and past history.  A typical program might mix include the following roles and functions:

Universities:  Technology transfer offices, technology parks, research labs, entrepreneurship training and programs for students and faculty.Businesses:  Willingness to collaborate with universities and startups, venture investing, technology partnerships.Economic/Workforce Development:  Matching fund programs, incubators/accelerators, STEM training programs, mentoring/coaching, industrial parks, research lab support.

This listing of potential roles likely doesn’t sound much different than what most places do today. Yet a deep tech ecosystem does work differently.  We can’t simply place entrepreneurs in a 12-week accelerator course or rely solely on university technology transfer offices to move ideas from lab to market.  Instead, deep and sustained collaborations and specialized scientific and engineering expertise must be tapped to help companies identify market opportunities, build prototypes, and successfully go to market.

Many of these emerging models, such as the EDA Tech Hubs, are in the early stage of development.  However, some states and localities have been focused on deep tech for a longer period of time.  Mass Ventures (formerly known as the Massachusetts Technology Development Corporation) is a prime example.  Beginning in 2020, Mass Ventures’ leadership shifted their entire program focus to deep tech, seeking to build on the Commonwealth’s world class research capacities.  Under this new model, Mass Ventures has revised and updated its program portfolio, which now includes the following initiatives:

MV Capital:  A suite of funding tools, including a deep tech venture fund and Small Business Innovation Research (SBIR) program matching grants ranging in size from $100,000 to $500,000.  (As a point of comparison, most state SBIR matching grant programs provide up to $50,000 for SBIR Phase 1 winners.)MV Accelerate:  Supports a Technology Commercialization Acceleration program and MassVX, a mentoring and coaching network that links researchers to business experts and mentors.MV Spinouts:  Includes the Massachusetts Technology Transfer Center, supporting academic spinouts from state colleges and universities, and a statewide technology transfer network.

This mix of programs makes sense and is well suited to the unique circumstances of deep tech startups.  It provides larger infusions of capital, develops tech talent, and builds strong connections between entrepreneurs, researchers and science/engineering expertise

What’s Next?

We are in the early stages of this mini-revolution in how we support innovation and technology-based economic development.  We’ll learn more from the experience of various tech hubs and innovation engines now getting started around the US and around the world.   As these efforts gain traction, several broad themes seem relevant.  First, when it comes to deep tech entrepreneurship, we need to think bigger.  We’ll need to embrace grand missions that help address pressing societal problems.  Second and relatedly, we’ll need to invest more.  You can’t combat climate change with a  $50,000 matching grant.  Third, we need to build deeper collaborations that engage entrepreneurs, academics, corporations, and a diverse mix of ecosystem partners.  Finally, we’ll need to be patient.  Developing world class solutions to grand societal challenges takes time, but that’s true of all important and consequential things!

Useful Resources

Here are a few reports that I’ve found helpful:

Oihan Basilio Ruiz de Apodaca, Lars Frolund, and Fiona Murray, “What is Deep Tech and What are Deep Tech Ventures,” MIT REAP Program, 2023.

Boston Consulting Group and Hello Tomorrow,  Deep Tech:  The Next Great Wave of Innovation, 2021.

Jean-Francois Boubier, Anne-Douce Coulin, Constant Morez, Greg Emerson, Kaustubh Wagle, and Antoine Gourevitch, “An Investors Guide to Deep Tech,” Boston Consulting Group, November 2023.  

European Union Deep Tech Talent Platform.

X Prize, “What is Deep Tech:  The Top 100 Companies Advancing Humanity in 2023.”  July 21, 2023.

What’s New at EntreWorks Consulting?

We are enjoying the arrival of Spring and hope to connect with friends and partners in the coming year.  We’ve kicked off interesting projects in Indiana and Louisiana in recent months. In addition, Erik Pages of EntreWorks will be attending the Pennsylvania Economic Developers Association meeting in Harrisburg, where he’ll be providing a keynote address (April 16) on “Building Future Ready Economic Development Organizations.”  Erik will also be attending the Federal Reserve’s Investing in Rural America Conference in Roanoke VA (May 21), and the Deshpande Symposium on Innovation in College Park MD on June 10th.  Hope to see you on the road.

You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  Recent topics include the linkages between economic resilience and entrepreneurship, the gig economy during the pandemic, and evaluating federal small business programs. In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2024.

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 20, Number 3

December 2023

HIGHLIGHTS:     The Coming Fiscal Cliff:  Are We Ready?

                             What’s New at EntreWorks Consulting?

The Coming Fiscal Cliff:  Are We Ready?

In some ways, the past few years have been something like the opening lines from Charles Dickens’ Tale of Two Cities:  “It was the worst of times; it was the best of times.”  We’ve been through some horrible events, like a global pandemic, the January 6th insurrection, and ongoing wars in Ukraine and the Middle East.  While “best of times” is perhaps too strong as a description, these tough times have generated a few positives, such as improved economic conditions for many of our neediest residents and families.  For those working in economic development, these tough times have also produced many new policy innovations, and for the first time in my career, robust, and long overdue, investments in new community economic development programs and program capacity.

It appears likely that these small glimmers of good news may be coming to an end, as public budgets are tightened in the face of challenging economic circumstances.  As many organizations and programs are starting to gain traction, they may face something of a fiscal cliff as sources of funding start to dry up.  Are economic developers ready for these new challenges?  What can we do to sustain the good work that has occurred in response to the pandemic and its aftermath?  This issue of EntreWorks Insights offers some perspectives on where we may be going and where we should be going.

OUR RECENT HISTORY

Think back to the Spring of 2020, when our economic prospects were incredibly grim.  Hundreds of people were dying every day from COVID 19, unemployment reached 14.8 percent, and thousands of businesses were forced to shut their doors.  This crisis demanded a big response, and we got one.  The Federal government undertook a massive recovery effort, investing billions of dollars and embracing many new policy tools and ideas. According to the Pew Trusts, the value of Federal grants to states jumped 96% between 2008 and 2021. For the first time, Washington provided no-string attached direct payment to individuals, expanded unemployment insurance to support gig workers, and supported a host of other new social safety net programs. 

Economic development-related programs also saw major boosts in funding—thanks to the American Rescue Plan Act (ARPA), the Bipartisan Infrastructure Law (BIL), and the CARES Act. ARPA and CARES directly provided more than $500 billion for state and local governments, and other Federal efforts, such as increased Medicaid support, also provided indirect, yet still important, fiscal support at the state and local levels.  According to the Brookings Local Government ARPA Investment Tracker, anywhere from 7-10% of these funds directly supported economic and workforce development efforts, and large funding shares were also devoted to related activities in housing, infrastructure, and community aid.  Budgets for the US Economic Development Administration (EDA) reflect these patterns.  For most of the 2010s, EDA’s annual budget averaged around $288 billion. In FY2023, EDA’s total appropriations reached $1.6 billion. 

Thanks to these Federal investments, state and local economic development programs have hired staff, bolstered capacity, and helped provide an important lifeline for local businesses and workers. For the first time in years, many local economic development organizations (EDOs) could tap into sufficient resources and staff capacity needed to achieve their missions. Important progress has been made, especially in focused areas such as small business support where targeted local programs helped to keep firms in business and coach new and aspiring entrepreneurs starting new ventures.  Along the way, we have also made important progress in supporting underserved entrepreneurs who long lacked equitable access to capital, mentoring, and other resources.

OUR CURRENT DILEMMAS

Whether we like it or not, this era of federal largesse is coming to an end. No matter which party prevails in 2024, public spending at all levels is likely to decline. EDOs will face tough budget decisions, as these funding sources begin to dry up.  Can they keep the added capacity developed in recent years, or must they return to “doing more with less.”  While the pandemic’s impacts are lessened, major challenges still loom.  Climate emergencies are not going away, and long-standing problems, such as limited housing availability, also persist.  Meanwhile, many cities face eroding revenues as commercial vacancies skyrocket due to changing work patterns.   Some analysts, such as Drexel’s Bruce Katz, warn of a “coming fiscal storm” for American cities.

This looming fiscal reckoning will be especially challenging for EDOs operating in smaller rural communities. Due to limited capacity, these organizations have traditionally been less able to access Federal funding streams and other resources.  They enjoyed more success in recent years, but have still been shut out from many federal opportunities. Headwaters Economics, a Montana-based think tank, has developed a Rural Capacity Index which seeks to quantify local capacity levels.  The Index notes that in many regions of the US, more than half of communities can be defined as “low capacity,” i.e., they lack government capacity to effectively pursue outside funding opportunities.  Low capacity has real consequences as other Headwaters research has found that only 3% of recent Federal Emergency Management Agency (FEMA) funds went to low-capacity counties. Similar patterns regularly occur in other Federal grant programs.

A recent Center for Rural Pennsylvania offers similar findings. It finds that 62% of rural Pennsylvania communities (compared to 49% of urban locations) did not apply for recent federal/state transportation grants.  When asked why this occurred, rural community leaders pointed to an inability to find matching funds (62%) and limited staff capacity/expertise (60%) as key factors.

AVOIDING THE FISCAL CLIFF

Given the magnitude of recent Federal investments, state and local economic developers must be ready for some level of retrenchment and “right-sizing.”  However, it would be a shame if we simply abandoned or shut down the many new initiatives, and new ways of working, that have emerged over the past few years.  We must find new ways to retain these assets, so that we not only continue to support essential community building efforts, but we are also ready to respond in the event of future crises and economic shocks. 

Some observers are pushing large-scale responses.  For example, Bruce Katz and his colleagues are recommending some type of national commission, akin to the Advisory Commission on Intergovernmental Relations (1956-1996), to re-examine how federal, state, and local governments work together. At the local level, many cities are also undertaking in-depth reviews of their fiscal architecture, assessing how they can continue to generate the revenue needed to support basic services.

This focus on long-term fiscal restructuring makes sense, but is unlikely to have much near-term impact.  And, unfortunately, we’ll need to act before then.  While I can’t promise any universal solutions, let me offer a few ideas on how we might reduce the impacts of the coming fiscal reckoning facing EDOs across the US. 

Diversify Funding Sources

When creating economic development plans, we often focus on helping communities diversify their local economies.  The same is true for EDOs—reliance on a single source of funding can be a recipe for disaster.  As Federal funding streams slow down, EDOs must identify new sources of funding and support. 

Within ethical guidelines, there should be no limit to the range and type of new funding sources that EDOs can access.  We should embrace an “all of the above” strategy that seeks funding from member dues, fees for service, event revenues, and so on. 

Community philanthropy should be at the top of the target list here.  Over the past decade, community foundations have assumed a larger role in supporting community building and economic development.  This is a promising trend, but too few EDOs are pursuing this option.  Potentials steps might include creating special funds at a community foundation or creating a new community foundation from scratch.  In either case, these new funding sources can help provide needed funding while also helping to keep local dollars at home.

A large and growing network of organizations is available to support such work.  In addition to philanthropy networks, groups like LOCUS Impact are available to help communities create new funds or repurpose existing tools, including philanthropy, Community Development Financial Institutions (CDFIs) and others.  Invest Appalachia, a reginal network of CDFIs, offers an excellent case study of how these new impact investment models can bring new capital and resources to the community building field.

Build Capacity

Capacity building has always been a priority in development, whether it’s here in the US or around the globe.  As such, calling for more investment and more focus on capacity building is hardly a revolutionary suggestion.  But, we still need to continue these important investments. 

Capacity building investments can take many forms.  Direct investment in local EDOs or in technical assistance programs helps to build capacity, but other ideas can also help.  Examples include support for leadership or professional development programs, on-line training, and community partnering programs.   

Over the past few years, federal agencies have also been testing other new approaches.  For example, the US EDA has funded several Communities of Practice focused on specific issues such as the energy transition, manufacturing support, indigenous communities, and revolving loan fund operators. In addition, EDA has also invested in an innovative Economic Recovery Corps program to bring new talent to EDOs operating in distressed regions.  These promising pilot projects were funded with pandemic response-related funds.  Thus, their future sustainability may be at risk, even as they provide a real lifeline for many EDOs.

Import Capacity

Lower capacity regions may still lack sufficient resources to keep talented staff in-house.  In these cases, they might consider strategies that “import” capacity by bringing in outside organizations that provide technical assistance or staff support.  Consulting firms do serve this purpose, and we at EntreWorks Consulting certainly support that option!  Yet we also recognize that some regions may not be able to afford outside consulting support. 

Fortunately, we are also beginning to see the emergence of non-profit organizations with an explicit mission of providing additional capacity to at-risk regions.  These entities, typically funded via philanthropy or corporate partnerships, can provide staffing, technical assistance, community coaching, and other services.  Many of them operate like traditional consultants with a focus on technical assistance, but a growing share seeks to become more embedded in their host communities. Examples of this model include the West Virginia Community Hub, the Northern Forest Center, and the Center on Rural Innovation.   

Change Business Practices

Finally, we must recognize that much of this capacity problem results from our current business and funding practices.  Low-capacity regions have faced decades of neglect and disinvestment, and it is challenging for them to turn the tide.  They become caught in a vicious cycle:  they lack capacity which prevents them from accessing federal grant programs.  As a result, they must operate with limited staff and limited dollars to support their missions.

Some of these challenges result from our current business practices.  It’s simply too difficult for many low-capacity regions to identify and compete for various grant competitions sponsored by both public and private organizations. We can and should make these processes easier.  US Digital Response, a non-profit focused on improving how government agencies use technology, has developed a menu of proposals to help small communities better access these opportunities.  This program includes a host of sensible ideas, such as a single Federal application portal, streamlined reporting and evaluation processes, and revised grant competitions targeted to communities of varying sizes.

Lots of other good ideas can be added to this list.  For example, further reductions in grant match requirements can help attract more applicants, as would a wider embrace of non-competitive grants for distressed communities.  Finally, specific steps to engage regional organizations, like Councils of Government and Economic Development Districts, in supporting at-risk regions should also be considered.

We’re near the end of an unprecedented period of public largesse for state and local economic development.  These investments are having positive impacts, but they are still not providing sufficient support to small or at-risk regions who lack the capacity to compete for these funds.  In these cases, the rising tide has not lifted all boats.Simply throwing money at the problem is insufficient.  We’ll need to rethink how we do business as well.  If we support this work now, perhaps we can lessen the impact of future “fiscal storms.”

What’s New at EntreWorks Consulting?

We are grateful for a rewarding and productive year in 2023, and look forward to connecting with friends and partners in the coming year.  We wish you a very happy holiday season and a happy New Year!

You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  Recent topics include the impacts of AI, rural migration patterns, and strategies to support underserved entrepreneurs. In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2024.

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 20, Number 2

July 2023

HIGHLIGHTS:     The New Economic Development Pivot:  It’s About Talent

                             What’s New at EntreWorks Consulting?

The New Economic Development Pivot:  It’s About Talent

Many of the past few editions of EntreWorks Insights have focused on talent development and attraction.  That’s for good reasons, as the ability to develop, attract and retain talent is likely to become the new “three-legged stool” of economic development—replacing the old trinity of business attraction, new business development, and business retention and expansion. Because of the pandemic’s impacts and massive demographic shifts, businesses around the US (and the world) are struggling to find talented employees, managers, and leaders.  This is likely to be our dominant economic development challenge over the next decade.  

These statements are hardly revolutionary or unexpected.  Most economic developers seem to be embracing the new reality, but these new perspectives have not yet been reflected in new ways of doing business.  That seems to be changing now, and below we’ll dig deeper into how some states and localities are pivoting to situate talent as the key driver for future economic development investments and programs.

Most states and localities support robust workforce development and training programs, but these newer initiatives take on a more holistic approach to talent development and support.  They sometimes embrace training programs, but they typically focus on other issues such as housing, childcare, and quality of life, appropriately assuming that talented people want to live in nice places with a wide range of amenities and things to do. Placemaking and quality of life are priorities for investment.

This emerging shift in economic development priorities is being driven by ongoing talent shortages, but it’s also backed by solid research suggesting that locations with high-quality of life (as measured by things such as housing quality/affordability, spending on public schools, and access to recreation amenities) perform better on most metrics of economic performance. These factors matter more than traditional measures of business-friendliness when it comes to positive economic outcomes. The basic message is simple:  if you want to attract and retain talent, build a nice place to live!

How are these new directions being reflected in economic development practices?  It’s still early, but some states and localities are shifting their priorities. Take Indiana for example.  Back in  2021, Governor Eric Holcomb and other state leaders committed to investing $500 million into the READI program (Regional Economic Acceleration and Development Initiative).  While the READI title sounds like a typical economic development program, its investment priorities are different.  Most READI dollars are being invested in quality of life and quality of place-related projects.  Examples include housing, childcare centers, recreational amenities, and the like.  Projects in the Indiana Uplands region (an 11-county area surrounding Bloomington) offer a good sense of READI priorities. The current regional project list includes early education centers, a regional land bank program, several affordable housing programs, trails and parks in all 11 counties, and several new arts/performance venues.

Policymakers in Michigan also seem to be debating similar ideas.  A recent analysis of Michigan’s talent landscape, Michigan’s Great Inflection, found that Michigan must do a better job of talent development, recommending a series of initiatives including new programs supporting talent training and placemaking.  Seeking to address these challenges, Michigan Future Inc. has advocated for a new Neighborhood Talent Concentration Initiative which would invest in creating high-amenity vibrant neighborhoods and districts across the state.  Projects would support areas such as arts and culture, mixed income housing, commercial corridor development, and parks/recreation assets.

Not surprisingly, Vermont is a long-time player on this front as well.  The state’s Better Places program invests small amounts ($5K to $40K) in community placemaking projects.  Better Places is especially interesting for its embrace of “crowdgranting,” a practice where projects compete to attract groups of local investors, much as found in typical crowdfunding projects.  But, in this case, the local crowdfunding effort is supported and accelerated by state-backed matching grants.  Vermont’s excellent Think Vermont website is also a great resource to learn about these programs or to learn more about relocating there.

Similar pilot efforts are underway across the globe. For example, the Paris-based Organization for Economic Cooperation and Development (OECD) is supporting a project entitled “Rethinking Regional Attractiveness in the New Global Environment.”  This effort examines case studies in 15 OECD country locations and finds that key factors for attracting foreign investment, talent, and visitors are evolving.  Today, the most critical factors for economic growth are:

Strong digital performance and transportation access (for inward investment)Available housing, internet speed, and the ability to attract international students (for talent development)Vibrancy, creativity, and natural amenities (for visitor attraction).

These new efforts to link economic development, talent development, and placemaking need not be built from scratch. Large and knowledgeable networks of experts, activists, and community-minded people are already engaged in various placemaking efforts supported by groups like Main Street America, the Citizens Institute for Rural Design, and even the US Department of Agriculture, which has supported a Rural Placemaking Innovation Challenge since 2020. I also highly recommend the Brookings Institution’s Bass Center for Transformative Placemaking as a great resource.  Check out their Placemaking Postcards blog.

Talent shortages are going to be with us for many years, so we might as well get used to this new reality. Providing  good job and training opportunities may be necessary parts of your community’s future talent strategy, but on their own, they may not be sufficient to help you develop, retain, and attract talent.  Perhaps building a great place to live is the new field of dreams?

What’s New at EntreWorks Consulting?

We’re winding down with several recent projects in Southern Virginia, including an evaluation of the Southern Virginia RISE Collaborative and a feasibility study for an innovation hub facility located in Brunswick County, VA. We’re also continuing to support the multiyear Building Resilient Economies in Coal Communities (BRECC) initiative, led by the National Association of Counties, and the State Economic Development Executives Network, in collaboration with the Center for Regional Economic Competitiveness (CREC).  Erik Pages will also be serving as an instructor for the University of North Carolina’s Basic Economic Development Course (July 31-August 3) in Chapel Hill, NC.

You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  Recent topics include the amenity trap, the future of small cities, and our ongoing childcare crisis. In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2023.

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

EntreWorks Insights

Volume 20, Number 1

April 2023

HIGHLIGHTS:     It’s About the Kids (and their Caregivers and their Communities)

                               What’s New at EntreWorks Consulting?

It’s About the Kids (and their Caregivers and their Communities))

For American businesses and their home communities, there is no bigger issue today than talent.  Because of the pandemic’s impacts and massive demographic shifts, businesses around the US (and the world) are struggling to find talented employees, managers, and leaders.  This is likely to be our dominant economic development challenge over the next decade.  

This demographic drought has many causes. Baby boomers are retiring, birthrates are declining, and poor working conditions in many fields hamper recruitment and retention.   We are responding in multiple ways with various experiments related to training, education, job quality, job design and the like.  These efforts should continue, but we also need to aggressively address problem areas that have direct impacts in reducing labor force participation.  Childcare needs to be at the top of this list.

Let’s not sugarcoat it.  We are in the midst of a childcare crisis.  Care costs too much, and the quality of care is often poor.  Kids suffer as a result, as do their parents and caregivers. These effects ripple into the wider community and economy.  Lack of affordable childcare forces parents to scramble every day and keeps many caregivers out of the workforce. 

The economic impacts of this crisis are profound.  According to Ready Nation, a business advocacy group, the childcare/toddler care crisis may be costing the US as much as $122 billion in lost earnings, productivity, and revenue every year.  Eighty-five percent of prime caregivers report that childcare problems impede their commitment to work. According to 2022 data from McKinsey, 35% of working moms and 20% of working fathers who left work during the pandemic did so due to childcare cost and availability issues.

This economic toll is not theoretical, as any parent or caregiver can tell you. The basic task of finding childcare is tough, especially for the 51% of Americans who live in “childcare deserts,” defined as areas where there are more than 3 children under age 5 for every licensed childcare slot. In rural America, 60% of people live in childcare deserts.

If you can find childcare, good luck paying for it!  Ready Nation estimates average childcare costs at around $5,500 per year. This number seems low to me.  A 2018 study here in Arlington VA found that the average family with two children could pay as much as $42,000 per year for childcare. In all cases, this is serious money.  In fact, annual childcare costs typically exceed the cost of in-state college tuition.  For many working families, childcare is their number one household expense.

These are longstanding problems that we have chosen to ignore. But, as the talent wars heat up, it’s time to face reality. Robust and affordable childcare services are essential infrastructure for any community that seeks to attract and retain a talented workforce.  Better childcare will be a lifeline for families, but it will do even more.  It will help spur economic growth, improve educational outcomes for children, and improve the lives of parents and caregivers. Frankly, the arguments for doing this are so strong it seems ridiculous that we haven’t acted already.

Fortunately, it seems like some regions are finally getting the message. In many cases, corporate leaders are stepping up and investing in improved in-house childcare.  But, more comprehensive solutions are needed and this will likely require action and investment from state and local governments.  Thanks to American Rescue Plan Act (ARPA) funding, many states invested in childcare stabilizations programs that addressed some of the core challenges facing the industry, such as low wages and business/operational challenges for providers.  For example, in Virginia, grants were used to help providers increase pay, improve training, purchase equipment, pay rent, and many other uses.

These grants were a lifeline, but they are a temporary fix. Many regions are now embracing more long-term solutions. In Nebraska, the Community for Kids effort works with counties across the state to improve local access to child care.  New Mexico can rightly be considered a national model on this front. In 2022, residents approved a constitutional amendment to guarantee a right to early childhood education and to provide a stream of funding (around $150 million per year) to ensure childcare availability for all.

While it’s still too early to assess results from New Mexico, this type of bold action is going to be needed in other regions, too. Federal action may also be forthcoming as several related bills have been introduced in Congress.  For example, the recently introduced Child Care for Every Community Act would provide expanded federal supports for local childcare services.  While the bill faces many obstacles to passage, its introduction is a hopeful sign.  Investing in childcare is not only a smart economic development decision, it’s the right to do as well!

What’s New at EntreWorks Consulting?

As Spring continues its march, we’re busy and engaged on many interesting projects.  Current work includes an evaluation of the Southern Virginia RISE Collaborative and a capital access assessment for the North Central Pennsylvania Regional Planning and Development Commission.  We’re also continuing to support the multiyear Building Resilient Economies in Coal Communities (BRECC) initiative, led by the National Association of Counties. Thanks to these projects and other work, Erik Pages of EntreWorks Consulting is back on the road.  Look for me in Roanoke VA (April 12), Bristol TN/VA (June 6-9), and at the Rural RISE Summit in Waterville, ME on June 22. Finally, Erik will also be teaching the IEDC Entrepreneurship and Small Business training course on May 3-4 (virtually) and will be in person teaching part of UNC-Chapel Hill Basic Economic Development Course on August 3rd.

You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2023.

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 19, Number 3

December 2022

HIGHLIGHTS:     Thanks for 20 Years!

                              What’s New at EntreWorks Consulting?

Thanks for 20 Years!

The end of December marks the 20th anniversary of EntreWorks Consulting.  It’s been a fun and rewarding ride, and I’m grateful for the opportunity to engage in such interesting work. I want to especially highlight and thank some of our lead partners, most of whom have been working with us for the entire 20-year period.  This group includes the Center for Regional Economic Competitiveness (especially Ken Poole and Sean McNamara), LOCUS Impact Investing (Deb Markley), BDA (Ellen Harpel), Camoin Associates (especially Jim Damicis and Christa Franzi), Innovation Policy Works (Cathy Renault) and many others. 

Thanks also to all of our friends, partners, and most importantly, customers who have supported us along the way. But, instead of “thanking the academy” or whatever you do on a big anniversary, I want to highlight some of our current and former customers and some of the cool things that they have been doing. In some cases, EntreWorks Consulting supported a small component of the highlighted efforts, but the real work and credit belongs with our customers and partners who do the hard work of economic development every day.

Some of these projects might be considered “award winners” that get recognized by the International Economic Development Council (IEDC) or other trade associations.  But most are not that sexy or revolutionary. Instead, they are examples of the good things that happen when smart and committed people invest time, resources, and heart into building better communities and better places. This is the real joy of working as an economic development consultant:  watching how communities evolve and transform themselves. Below are vignettes on a few locations and programs that have inspired me over the years.

Appalachian Regional Commission:  Back in late 2002, ARC was operating with an annual budget of around $75-80 million; today, they support funding levels that have exceeded $1 billion.  But, even in the earlier days, ARC was doing great work to transform Appalachia.  And, it was a pioneer in promoting entrepreneurship.  In fact, ARC’s Entrepreneurship Initiative, which operated from 1997-2003 (we evaluated the program in 2004), was one of the first federal programs that sought to promote entrepreneurship-led economic development.  Today, ARC remains a leader in promoting new ideas and approaches to community building.  For example, it has led federal efforts to address the opioid epidemic and to support capacity building rural regions.

Berks County (Pennsylvania):  I grew up in Berks County, and worked for the local Member of Congress for many years.  So, working on a county strategic plan (The Ride to Prosperity) was both a treat and privilege.  Since that work in the early 2010s, Berks County has developed other strategic plans and programs. More importantly, the County’s economy remains relatively strong and diversified. If you want to see examples of supporting the manufacturing workforce or engaging an increasingly diverse community, Berks County offers some good models and lessons.

Maine Department of Economic and Community Development:  For many years, EntreWorks Consulting was part of a team that produced an annual evaluation of Maine’s economic development investments.  While we are no longer engaged in this work, we remain impressed by Maine DECD’s (and the Legislature’s Office of Program Evaluation and Government Accountability) continued commitment to regular and rigorous program evaluations.  These publicly-backed efforts are further supported by related initiatives such as the Maine Development Foundation’s annual Measures of Growth analysis (running since 1994).  Maine’s Legislature has passed laws requiring—and funding—regular evaluations, offering a model for other states and localities.

National Association of Community College Entrepreneurship: In 2002, few community colleges taught entrepreneurship.  A few schools, such as Springfield (MA) Technical Community College were testing new approaches, but they were isolated early pioneers. These visionaries knew that they were onto something and that community colleges could and should become key hubs in regional entrepreneurial ecosystems. They created NACCE to support this vision.  I was pleased to speak at NACCE’s first ever conference and to support the development of NACCE’s first strategic plan. Today, the team’s initial vision has come to fruition as entrepreneurship is now a core part of community college programming across the US. EntreWorks remains a long-time member of NACCE, and we continue to support excellent entrepreneurship programs such as the RISE program used across Indiana and in its Ivy Tech community college system.

North Carolina Rural Economic Development Center:  Way back in 2003-2004, we worked with the Rural Center to establish the Institute for Rural Entrepreneurship.  At that time, this effort was unique.  Today, North Carolina is full of great resources for rural entrepreneurs, and the Rural Center supports a host of small business financing programs, including Thread Capital, Corner Square Community Capital, and many others.  And, it’s not alone—thanks to excellent ecosystem resources available throughout the state. 

The Pantheon Business & Innovation Theatre: For much of the 20th century, the Pantheon Theatre was the hip and happening place in downtown Vincennes, Indiana, attracting famous acts like Duke Ellington, the Marx Brothers, and local boy Red Skelton.  But, like many small-town theatres, the Pantheon fell on tough times in the 1960s and was shuttered. However, community leaders had a longtime vision to restore the theatre as a community hub and incubator/coworking space.  In 2019, EntreWorks assisted Vincennes and Knox County with a feasibility study for the Pantheon Business & Innovation Theatre, which opened for business in 2020.  Today, the Pantheon is thriving and an exciting entrepreneurial community is emerging in Southwest Indiana.  In addition to offering office space and business support, the Pantheon team has developed close partnerships with groups like the Purdue Foundry program, AgriNovus Indiana, and Elevate Ventures. 

Rapides Foundation:  For many years, EntreWorks has supported regular evaluations of economic and community development investments made by the Alexandria, LA-based Rapides Foundation.  I’ve been consistently impressed by the Foundation’s commitment to innovative workforce development programs, and it’s now clear that others are getting the message too. In September 2022, the Foundation received a $14 million investment from philanthropist MacKenzie Scott that will help to ensure that this important work continues.

Roanoke-Blacksburg Innovation Blueprint:  In the early 2010s, EntreWorks worked with the Roanoke-Blacksburg (VA) Technology Council and other partners to produce a regional innovation plan.  At the time, the region already had tremendous assets in place, including Virginia Tech’s main campus in Blacksburg and Roanoke’s Fralin Biomedical Institute.  Since that time, the region has continued to innovate and a strong entrepreneur ecosystem is in place. Newer innovation assets include the Verge innovation network, the RAMP business accelerator, and a regional entrepreneur hub for accessing needed business services. This region is a national model for supporting innovation and entrepreneurship as a core economic development strategy. 

Wayne Tomorrow.  Wayne County PA (population 51,431) is located in Pennsylvania’s far northeast corner.  It is a beautiful and community-minded place.  Back in 2013, local leaders formed Wayne Tomorrow as a vehicle for conversations about the County’s future. (EntreWorks assisted Wayne Tomorrow with planning efforts in 2018-2019) Today, Wayne Tomorrow serves as the region’s umbrella organization to address pressing community issues, supporting volunteer task forces addressing local challenges such as housing, transportation, agriculture, and community health and well-being.  This effort has been a huge success, fostering a strong community spirit and generating many successful projects.  Examples include the Stourbridge Project, a community incubator and coworking hub, a County-backed small business fund, a transformed Wayne County Community Foundation, and attraction of major funding to support a recovery-to-work treatment, rehabilitation, and training center.

What’s New at EntreWorks Consulting?

We’re looking forward to the next year—and the next decade–of work at EntreWorks Consulting.  We’ve recently finished up large projects in Appalachia, the US Virgin Islands, and Danville VA, and we’re continuing with ongoing work in Indiana and Virginia.  We’re also kicking off a new effort with our partners at the National Association of Counties:  The Building Resilient Economies in Coal Communities (BRECC) initiative. BRECC will work with a host of coal-reliant communities to help identify and develop new economic engines that will diversify regional economies and assist in a smooth and just economic transition.    

You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2023. Happy holidays!

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 19, Number 2

September 2022

HIGHLIGHTS:     Recent Reads:  Fall Book Ideas

                              What’s New at EntreWorks Consulting?

Recent Reads:  Some Ideas for Your Fall Reading

If you’re like me, the return of Fall weather means a more intensive reading schedule along with football and other Autumn pleasures. In an effort to feed your reading itch, I’ve made a short list of my recent reads that have some relevance to our work in economic and community development.  As you’ll see, my reading preferences tend to be pretty wonky. You won’t find a light vacation read here, but you might get some useful insights on community building. Most of these books were published in the past year. We welcome your book ideas too—if you have recommendations you’d like to share, send them to me at epages (at) entreworks.net and I’ll post them on the EntreWorks blog!

Billionaire Wilderness:  The Ultra-Wealthy and the Remaking of the American West by Justin Farrell.

I’ve enjoyed every book on this list, but this one is probably my favorite. It’s a fascinating tale of life in Teton County (Jackson Hole), Wyoming, from a former resident turned Yale sociology professor.  Farrell’s local connections gave him access to a wide swath of the community, and his study examines the lives of the ultra-wealthy and those who work to support them.  To a certain extent, this is a story of loving a place too much.  Thanks to the influx of the uber-wealthy, it’s become almost impossible to find affordable housing in the region, forcing workers to commute from miles away.  (Jackson County’s median home price currently tops $3 million!).  The new wealthy residents bid up prices, and, in their zeal to protect their ranches and assets, place tight restriction on future development.  I’ve read several recent books on recent trends in scenic rural locales:  Dividing Paradise by Jennifer Sherman is another good read. Billionaire Wilderness is especially good at discussing how the uber-wealthy view their lives and communities. If you live in one of these new Zoom-towns, this book is especially relevant for you.

Place and Prosperity:  How Cities Help Us to Connect and Innovateby William Fulton.

Bill Fulton is a well-known urban planner with long experience working in cities in California and Texas.  This book represents a summation of what he’s learned over a long and impressive career, and it’s well worth your time. His basic equation is simple: Place + Prosperity = A Successful Community.  The book’s various essays explore aspects of how we can support business and job growth while also building places that have a distinctive and desirable sense of community. This book has lots of thought-provoking ideas, and real-life examples of what works in practice.

Constructing Community-Urban Governance, Development and Inequality in Boston by Jeremy Levine.

The last edition of EntreWorks Insights focused on issues of community capacity:  how can rural and distressed places effectively compete for outside funding and projects if they lack essential resources and capacity? That’s a core focus of Constructing Community too.  Levine examines the role of community development corporations in Boston, with a particular focus on development of a new transit line through previously unserved and disadvantaged neighborhoods. Levine highlights the role of non-profit organizations as community intermediaries. These NGOs bring needed capacity but there is no free lunch. Do these organizations truly represent “the community?”  Are they ensuring that all voices are heard?  Levine recognizes that these processes now represent “urban policy in practice,” but also raises important questions on whether these practices are truly fair, equitable and effective.

The Shadow of the Mine:  Coal and the End of Industrial Britain by Huy Beynon and Roy Hudson.

I’ve worked with many coal-reliant communities in recent years, so I was intrigued to read this assessment of how Britain dealt with the decline of coal in the 1970s and 1980s.  It was a different time and place, but let’s just say that most of the lessons here fall into the “what not to do” category.  Britain’s coal production was centered in two different regions:  South Wales and Durham.  Each place fared differently, but the end result remains the same. The end of coal, and even worse, limited efforts to help communities rebuild and recover.  Even today-decades after the closures-many of these regions, especially in Wales, are among Britain’s most economically challenged.

How States Government Can Target Job Opportunities to Distressed Places by Timothy Bartik.

This entry is more of a long research report as opposed to a book, but that doesn’t mean it’s not deserving of close reading by economic development professionals.  The Upjohn Institute’s Bartik is one of our leading economic development policy experts and this report distills decades of his work to make economic development programs more effective and inclusive. This report, available for free from the Upjohn Institute, contends that our current public economic development programs need major restructuring to better address local labor market challenges. This is a big challenge, as around 2/5 of all Americans live in distressed local labor markets. Bartik calls for targeted state block grant programs as one solution, and he offers extensive details on how and why these initiatives should work.  Overall, he estimates that this effort, if fully implemented, could cost up to $30 billion per year.  That’s a large number, but it still pales in comparison to the roughly $80 billion that is estimated to be spent annually on economic development tax incentives.

What’s New at EntreWorks Consulting?

It’s been a fun and productive 2022 so far, and I’m looking forward to the coming months.  In addition to interesting work engagements in Danville (VA), Prince William County (VA), Indiana and Appalachia, I’m excited to be heading on a family trip to Denmark in October.  We’ve also recently closed work on projects for the US Virgin Islands and Penn State University-Harrisburg.  Finally, Erik Pages of EntreWorks Consulting has been appointed to the Advisory Board for the American Resilience and Equity Networks Initiative (ARENI), an interesting new initiative led by the University Economic Developers Association.

You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  In addition, you can still access blog updates at our Facebook and LinkedIn pages.  Recent posts have examined the commercial kitchen sector and debates on regulating the gig economy.  We look forward to connecting in person at some point in 2022 and beyond!

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Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.Erik R. PagesPresidentEntreWorks Consultingwww.entreworks.net  EntreWorks InsightsVolume 19, Number 1May 2022 HIGHLIGHTS:     Small Communities and Local Capacity Building                               What’s New at EntreWorks Consulting? Small Communities and Local Capacity Building   Since January, we’ve been involved in supporting an interesting and important project funded by the Appalachian Regional Commission (ARC) and the US Environmental Protection Agency (EPA):  the Community Capacity Training Pilot Program.  This effort works with communities across Appalachia to provide technical assistance and program development support, with a special focus on helping smaller under-resourced communities compete successfully for new Federal grant programs, especially those tied to the American Rescue Plan Act (ARPA). Capacity building has always been a big challenge for rural regions, but its critical importance has been further highlighted by the massive increase in new federal investments for local economic development, workforce and infrastructure projects.  While these funds represent an historic opportunity to address long-standing community challenges, recent experience also highlights another vexing reality:  many smaller communities simply lack the capacity—in terms of staff, expertise and management capabilities—to apply for, win, and effectively manage major Federal grant programs.  Our project is trying to help, as are other capacity building efforts funded by ARC, EPA, the US Economic Development Administration (EDA) and others.  But, what we’re doing is not enough and we need to find new approaches that give every community, not matter how small, a real opportunity to compete for major new public investments.  This issue of EntreWorks Insights examines the challenges of rural capacity building, and offers some preliminary ideas on how we might improve our current practices and processes. The Rural Capacity Challenge Community capacity can be a fuzzy concept, but, for our purposes, I would use the Aspen Institute’s definition:  “Community capacity is the combined influence of a community’s commitment, resources and skills that can be deployed to build on community strengths and address community problems and opportunities.” Communities with high capacity tend to be healthier on many fronts; they are able to identify problems, come together to craft solutions, gather resources as needed, and implement related action strategies.  Communities with weaker capacity may lack the energy or resources to address pressing issues, or may simply not know how to proceed in event of crisis or emergency. Not surprisingly, lower capacity communities are often centered in rural areas with lower populations and fewer resources than those found in larger urban centers. These lower capacity locations are sadly common, and are found across the US.  A recent Rural Capacity Mapping effort from Headwater Economics estimates that anywhere from 22% (in the Northeast) to 76% (Midwest region) of American communities could be classified as low capacity via a set of metrics tracking, among other things, staffing levels at local organizations, local poverty rates and income levels, educational attainment, and local broadband access. This ranking system identifies the following ten states as those with the most limited capacity:   North Dakota, South Dakota, Oklahoma, Nebraska, Montana, Arkansas, Kansas, West Virginia, Louisiana, and Mississippi. So What? In isolation, one could make the case that concerns about community capacity are overblown.  Leaders in lower-capacity states might conceivably argue that the benefits of lower taxes and reduced government spending may outweigh the benefits of strong community capacity.  Yet there are real downsides to ignoring these issues.  First, many low-capacity communities are facing significant new challenges, especially those related to climate change.  In fact, the Headwaters Economics assessment estimates that anywhere from 24-28% of all low-capacity communities in the US face heightened risks from either wildfires or flooding. Equity presents a second concern.  These communities have pressing needs that they are not able to solve with existing local resources. In many cases, these legacy problems directly threaten the health, safety, and livelihoods of local residents.  Take the example of Martin County, Kentucky and its decades-long efforts to address local water quality.   A 2019 analysis found that, in 2018, water was unaffordable for 41.5% of local residents.  Nearly 70% of all local water is lost as it traverses local water systems, and water contamination rates are dangerously high. Overall, Kentucky’s backlog of water and sewer projects has been estimated as high as $14.5 billion. State and local leaders have sought to address these problems for years, but only now—thanks to new ARPA investments—have they been able to finance the needed system upgrades. While these water quality issues in Kentucky are finally being addressed, many lower-capacity communities lack the ability to attract outside support. In many cases, rural community leaders fail to apply for new funding, especially for competitive grants like the EDA’s Build Back Better Challenge or for grants, like ARPA funds, that require extensive audit and reporting. Data from local government trade associations, such as the National Association of Counties and the National League of Cities show that many communities have opted to use their local ARPA allocations to replace lost revenues from the pandemic. Many smaller localities chose this option because it generates the fewest reporting and administrative burdens.  This is a legitimate use of funds, but it would be preferable for regions to use this historic investment opportunity to make historic investments that support long-term economic prosperity.  A tremendous opportunity to think big and be ambitious may be lost—largely due to limited local capacity to design and execute ambitious projects.  So Now What? These capacity issues affect all federal grant programs, and the feds are trying to help.  For example, the EDA and USDA have recently published a helpful project guide for rural communities.  In addition, many federal programs, like the Community Development Financial Institutions (CDFI) program, do try to target investments toward rural places. Yet effective solutions cannot come from Washington DC alone.  If we hope to truly address these capacity issues, we’ll need to think about additional solutions as well.  Here’s a few things that can help. Provide Some Direct Funding Federal and state agencies should consider supporting a mix of funding streams that combine competitive grant competitions with more limited direct funding for smaller communities and under-resourced community development organizations. These funds should have few strings attached, ensuring that the investments can be used to support regular program operations as opposed to specific project. By seeding the development of local economic development expertise, these investments not only build capacity but they also help lower-capacity places compete for future funding. The benefits of existing community capacity are clearly present in Appalachia, where many smaller communities rely on assistance from their Local Development District (LDD) or Councils of Governments (COGs). These regional entities, which receive direct funding from several federal and state agencies, support planning, project development, and project management. In some states, like South Carolina and Pennsylvania, these organizations receive direct funding to help localities apply for various state-backed grant programs.Invest in Technical Assistance Services Many public agencies provide technical assistance via webinars, office hours, program guides, and other tools.  This assistance is essential, but more hands-on technical assistance is also needed.  In some cases, agencies can bring in outside consultants to offer such assistance.  Our current ARC/EPA project works in this fashion. These one-off technical assistance efforts are helpful, but many low-capacity places would benefit from more sustained support and partnerships.  This type of sustained capacity building is being provided in many locations by non-profit organizations, foundations, and universities.  Some great examples include: The West Virginia Community Development Hub, which provides a host of support services to communities across WV.The Just Transition Fund, a philanthropic initiative assisting coal-impacted communities as they apply for federal assistance.Many University programs support capacity building in stand-alone programs or via initiatives like Rural Extension Services.  Good examples include the University of North Carolina’s School of Government, Albright College’s (PA) Center for Excellence in Local Government, and Purdue University’s Center for Regional Development  EDA’s University Center programs support this type of work.Build Rural Development Hubs The Aspen Institute and others have pioneered new thinking about rural development hubs, i.e., rural economic development organizations with strong staff and management capacity to address a wide range of community development challenges.  These intermediaries play a growing role in providing technical assistance and supporting project investments in rural places.  Rural development hubs can take many forms.  They may operate as a non-profit, such as the WV Community Development Hub or the Northern Forest Center, as a quasi-governmental agency such as an LDD, or as an anchor institution, such as a major hospital system or local college/university. Regardless of their structure, these hubs share key characteristics.  Most importantly, they view community capacity building as a core mission. They do this via technical assistance, local leadership programs, coaching, and public advocacy. They are essential partners for smaller communities. Closing Thoughts Capacity building must begin at home; lower-capacity regions need to recognize the problem and commit to building strong community development expertise and capacity.  But, they can’t do it alone.  The ideas noted above, as well as the many excellent recommendations from the Aspen Institute and other rural advocates, can help close this capacity gap.  This support can help rural places design their own solutions that tap into outside investment streams, but which are designed and executed by local people with the skills, knowledge, and capacity needed to succeed.  What’s New at EntreWorks Consulting? We’re back on the road and keeping busy with some exciting new engagements, including work in the Virgin Islands, Northwest Indiana, and in Appalachia.  Erik Pages has a few upcoming speaking engagements including presentations at the National Association of Counties annual conference outside of Denver CO (July 22-23) and teaching the International Economic Development Council’s Entrepreneurship and Small Business course (June 21-22).  In addition, we’ve published several new articles and book chapters, including the following: Ã¢â‚¬Å“Connecting Entrepreneur Ecosystems across Urban and Rural Regions:  Lessons from Central and Western Virginia,” in Vibrant Virginia: Engaging the Commonwealth to Expand Economic Vitality. Virginia Tech Publishing, 2022. Ã¢â‚¬Å“Shale Energy and Regional Economic Development,” in When Fracking Comes to Town:  Governance, Planning and Economic Impacts of the US Shale Boom, edited by Sabina E. Dietrick and Ilia Murtazashvili.  Cornell University Press, 2021. Delta Regional Authority, Labor Market and Workforce Report, 2022.  Available at:  https://dra.gov/images/uploads/content_files/DRA_laborMarketReport22_review-5.pdf You can find reports and other great resources at our website; we encourage you to check it out. The new website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  In addition, you can still access blog updates at our Facebook and LinkedIn pages.  Recent posts have examined Britain’s “Levelling Up” programs, trends in workforce development, the emerging fintech sector, and some suggested new readings.  We look forward to connecting in person at some point in 2022! 

Copyright © 2022 EntreWorks Consulting, All rights reserved.Want to change how you receive these emails?You can update your preferences or unsubscribe from this list.

EntreWorks Insights–A newsletter brought to you by EntreWorks Consulting, Arlington, VA Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.Erik R. PagesPresidentEntreWorks Consultingwww.entreworks.net  EntreWorks InsightsVolume 18, Number 2December 2021 HIGHLIGHTS:       A New Gig Economy Social Safety Net?                               What’s New at EntreWorks Consulting?  A New Gig Economy Social Safety Net?  Lessons from the Pandemic The COVID-19 pandemic has been a challenge for all of us, and it has transformed how we will live, work, and play going forward.  Whether we like it or not, we’ve been in the midst of many experiments about how we are going to work in the future.  Some of the biggest shifts relate to the independent or gig economy workforce, and that’s what I’m going to dig into below. When COVID-19 first led to shutdowns in March 2020, governments around the world scrambled to bolster social safety nets.  In the US, we passed the CARES Act, which governed much of our immediate response to the pandemic.  Among other things, the CARES Act funded various emergency loan programs, expanded unemployment insurance (UI) benefits, and numerous other essential social programs.  For the first time, the CARES Act, via the Public Unemployment Assistance Program (PUA), also expanded the ranks of “covered employees” to include many independent, contingent, and gig economy workers.   PUA was an important innovation in a number of respects. It represents one of the first times that we have experimented with social support programs targeted to the independent workforce. On many fronts, it worked well. It successfully targeted younger and more marginalized workers who would not have qualified for traditional UI benefits.  The JP Morgan Chase Institute also found that PUA benefits were an essential hedge against lost income, even though the benefits were often paid after long delays.  We also know that there was huge demand for the PUA benefits, which the National Association of State Workforce Agencies referred to as a Ã¢â‚¬Å“claims tsunami.”  In fact, they accounted for nearly half of all US claims for expanded UI benefits during the pandemic.  While independent workers accounted for about half of all new claims, the total costs of these benefits represented about 12% of UI claim dollars.  This lower dollar value likely reflects the lower pay received by this share of the workforce.  An Early Post-PUA Assessment These PUA benefits ended in September 2021, and now is a good time to start assessing their impacts.  The biggest takeaway is that PUA provided a much-needed lifeline for at-risk workers.  Demand for the benefit far exceeded expectations.  We also know that the program affected many marginalized workers who were not eligible for other benefits.  This group includes younger workers, minority workers, and those with less established employment histories.  While PUA beneficiaries received lower levels of support, they have tended to claim benefits for a longer period than other UI recipients.  This trend has generated some debate: are PUA recipients being discouraged from returning to work or are do they face higher barriers in their return to work?  However, recent research suggests that the work disincentive impacts of extended PUA and UI benefits were limited. So, while it is still too early for definitive conclusions, let me suggest a few take-aways: 1. Extended unemployment benefits for independent workers were essential lifelines during the unprecedented economic shocks of COVID-19. 2. The benefits supported people most in need, and who would have been shut out of traditional public benefit programs. 3. The PUA program worked well even though its rollout was challenging to both program managers and beneficiaries. PUA and the Post-Pandemic Gig Economy The PUA effort occurred during an unprecedented economic emergency, and, despite some growing pains, it appears to have worked fairly well.   Going forward, we can expect demand for similar programs to be strong, even if we avoid another calamity akin to COVID-19.  Reams of economic data and analysis all confirm that the trend toward independent work is growing and will continue to grow.  According to MBO Partners annual State of Independence Survey, 51 million Americans are now engaged in the gig economy. This number skyrocketed during the pandemic, jumping more than 34% in one year. A large share of this growth undoubtedly resulted from necessity, as displaced workers were pushed into independent work.  But, the biggest chunk of the growth was driven by opportunity and choice.  In fact, more than 60% of those surveyed by MBO Partners define themselves as “independent by choice” and 68% view independent work as more secure than a traditional job.  These people also seem happy with their choice, with 77% noting that they are “very satisfied” with independent work. A New Social Safety Net? In late 2021, we stand at a point where we know that the independent or gig economy is here to stay.  More people are choosing this type of work, and most appear to be happy with their choices. But, all independent workers remain at risk with a tattered safety net that offers little security in cases of emergency or god forbid, another pandemic-like economic shock. This has been our economic reality for a long time, but it doesn’t have to be that way.  Our pandemic experience with PUA shows that these programs are in high demand and that they work.  We also know that the US is unique among advanced economies in failing to provide adequate benefits and support to independent workers.  Perhaps even more importantly, we know that providing a better safety net for gig economy workers is good for the overall economy.   At the most basic level, a majority of gig economy workers, according to the Aspen Institute Gig Economy Data Hub, choose independent work and prefer this option to traditional employment. We should not underestimate the importance of supporting employment options that increase work and life satisfaction.  In addition, growing evidence suggests that the gig economy provides an important boost to the entrepreneurial economy.  The effect appears to be related to the role of gig economy platforms, like Uber or Lyft, in offering an opportunity to supplement income while developing a new business.  This impact seems to be strongest in locations with more challenging socioeconomic conditions.  This latter finding aligns with the PUA experience of providing targeted benefits to younger and more at-risk workers.  This evidence suggests that we’ll continue to see a boom in independent work, as it better accords with our current lifestyle and work preferences and it also has other economic benefits as well.  So, why do we don’t we make this work more sustainable and less risky?  This will require several steps. First, we should consider a permanent program similar to that offered by the PUA experiment.  This is somewhat easier said than done, since the we’ll need to find a way to pay for this program expansion.  Traditional UI benefits are funded by employers, so this source of funds is not available for independent workers.  In addition, this move will require changes in employment law to define eligibility and the scale and scope of benefits.   To put it bluntly, these are challenging tasks. Yet they likely cannot be avoided if the move to independent work continues its current pace.  We’re already seeing some states start to address this issue of defining (or redefining) employment.  These early efforts, such as California’s AB-5 law, have had mixed results to date, but other state policy experiments are underway.  Over the longer term, I suspect that states and localities who effectively address these safety net issues will have a competitive advantage in the ongoing war for talent.  In fact, they may be a better incentive than the cash relocation payments now being offered in places like Vermont, Tulsa, and Northwest Arkansas, among others. Second, we will need to improve our ability to track the independent workforce.  At the broadest level, we need to better understand the size of this workforce.  We have lots of data sources, but they vary greatly in how they identify independent workers. Clearer guidelines and definitions are needed. We’ll also need to improve how we measure independent work itself.  This issue proved to be a major barrier in accessing PUA support.  Many freelancers were not able to effectively document their past incomes, making it nearly impossible to verify their eligibility for PUA benefits.  Fixing this issue will require new rules and regulations, but it will also involve innovations that help independent workers track hours, income, and work activities.  Groups like the Workers Lab and Freelancers Union are testing promising new approaches and technologies here. Finally, social safety net innovations should not be limited to unemployment benefits.  They should also include support for insurance and retirement benefits as well.  According to the Pew Trusts, only 21.9% of non-traditional workers have access to workplace savings plan.  Real economic security depends on the ability to save for retirement or emergencies, and independent workers need fair access to these opportunities as well.  Our pandemic experience with the PUA program suggests that we can build a more robust and resilient safety net for all workers.  It’s time we did so. What’s New at EntreWorks Consulting? This is the 60th issue of the EntreWorks Insights newsletter!  We’ve been at this for a while—since May 2004 to be exact.  If you have interest, you can access our newsletter archives here. With COVID-19 subsiding (we hope!), business is picking up and we’re ready to hit the road again. We’re completing work on a number of interesting projects, including a regional workforce analysis for the Delta Regional Authority and support for inclusive entrepreneurship ecosystem development in Rhode Island.  We also published a recent Issue Brief on community benchmarking which can be found at the CEDS Central website. We’re using some of these lessons in an ongoing benchmarking study for the Louisiana-based Rapides Foundation as well. We recently upgraded our website and we encourage you to check it out. The new website also includes new platforms for the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  In addition, you can still access blog updates at our Facebook and LinkedIn pages.  Recent posts have examined supply chain developments, inclusive entrepreneurship, and America’s hidden workforce. Best wishes for a joyous holiday season. We look forward to connecting in person at some point in 2022! Copyright © 2021 EntreWorks Consulting, All rights reserved.Want to change how you receive these emails?You can update your preferences or unsubscribe from this list.

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President, EntreWorks Consulting

www.entreworks.net

EntreWorks Insights

Volume 18, Number 1: May 2021

HIGHLIGHTS:     The Foundational Economy

          What’s New at EntreWorks Consulting?

The Foundational Economy

The post COVID-19 economic recovery appears to be in full steam, but, as many observers have noted, it’s something of a K-shaped recovery.  Instead of a rising tide lifting all boats, we’re instead seeing two competing trends at work.  Some sectors and communities are booming. Meanwhile, there’s a long and growing list of those on the wrong-end of the K-shaped recovery:   it includes microenterprises, Main Street businesses and downtown districts, tourism and hospitality, and minority-owned businesses in general.  Sadly, the challenges facing many of these folks are not driven by a K-shaped recovery.  They were facing a K-shaped economy before COVID-19 hit. 

Like many people, my hope is that we all strive to fix this mess.   We build back better, as we’ve heard the politicians say.  Building back better means many things—investing in infrastructure, building a stronger safety net, building more resilient communities, and so on.  I believe that it also requires some new thinking from those of us working in the economic development profession.   Our mission can no longer simply be about job creation.  We need to embrace a broader mission of community building. 

Many promising things are already underway.  COVID-19 has triggered some excellent work on this front, so I’m feeling optimistic.  Groups like the International Development Council and others are revising their programs and practices to embrace new approaches and ideas.  Meanwhile, the COVID-19 pandemic spurred a host of innovations, especially in areas like small business finance, that are likely to inform current and future programs.  And Washington is back in the game, making needed investments in critical Federal programs. 

Beyond improved and expanded programs, we may also need to rethink or update some of our fundamental ideas about what we do as economic developers.   Specifically, let’s think about what is the industry target for many economic development programs.  For many of us, it is the traded sector company.  Traded sector firms are those that sell outside of local market, and thus bring in new wealth resources.  Along the way, they help to build a larger economic pie and create more prosperity. 

This is a very good thing, and that’s why many—if not most—economic development programs focus on traded sectors.  But, at the same time, that also means that the local sector—firms that only do business in the local market—don’t get much attention.  

COVID-19 showed that many of these Main Street firms operate with tight margins, and are at high risk in the event of major shocks like a pandemic or economic downturn.  But, COVID-19 also showed that these firms matter in terms of economics, culture, and well-being.  Local serving firms may not grow fast, but they are a strong and steady supplier of jobs.  At the same time, they anchor our communities and create a distinctive sense of place.  Who among us would prefer to go to McDonalds’ or Applebee’s when we could hit a great local restaurant or watering hole?  Finally, there is emerging evidence that vibrant Main Streets benefit our mental and physical health as well. In her new book, Main Street:  How a City’s Heart Connects Us All, Mindy Thompson Fullilove shows how Main Street districts serve as community gathering spaces and how they actually enhance the health of local residents.

So, if these local anchors offer so much, why are we ignoring them?  I’d argue that our economic development focus on traded sectors is one factor.  I’d like to see us broaden this focus to support both traded sectors and what some researchers refer to as the “foundational economy.”  The foundational economy is a concept that has emerged in European community development discussions.  It refers to the parts of our economy that provide basic goods and services, such as food, housing, retail stores, doctors, dentists, car repairs, and so on.  This mundane set of activities is obviously important in our daily lives, but it also has big economic impacts as it accounts for as much as 40% of all employment.  Using our current language, the foundational economy refers to those who are deemed “essential workers.”

While these workers may be essential, they haven’t received much attention from those of us in the economic development profession.  We have various small business and Main Street programs, but moat traditional economic developers are focused on supporting traded sectors, technology firms, or the next sexy cluster

From an economic development standpoint, the foundational economy matters in several ways.  Most importantly, these jobs and industries are non-cyclical.  Thus, they provide jobs in good times and bad.  As we saw, even in the midst of raging pandemic, these jobs provide something of an economic buffer in times of economic crisis.  Many foundational economy firms are locally owned, and thus provide many benefits associated with local ownership.  Finally, the goods and services provided by foundational economy firms may exhibit unique local attributes, and thus contribute to creating distinctive and attractive places.

These benefits are profound, but we should also recognize that the foundational economy may not necessarily drive major innovations or rapid economic growth.  Its role is likely most important in helping to diversify the local economy, to stabilize economies in crisis, to provide local sources of employment, and to support local placemaking.  These “services” are needed in every region.

A few European regions have embraced foundational economy strategies. Programs are now underway in Austria, Catalonia, and Scandinavia, among others. Wales has been an early adopter, and thus offers some guidance on what foundational economy strategies might look like.  Beginning in 2019, Wales introduced a new set of foundational economy initiatives as part of a broader effort “to reverse the deterioration of employment conditions, reduce the leakage of money from communities and address the environmental cost of extended supply chains.”  The project’s centerpiece was a Foundational Economy Challenge Fund designed to make small investments in pilot projects to test new approaches.  The Fund supported dozens of ideas, like child care collaboratives, using local microenterprises to deliver home care services, an online portal connecting renters to repair contractors, and programs to upskill social care workers.  Another set of strategies focuses on the use of procurement to support local firms, somewhat akin to anchor institution programs here in the US.

This was a small grant program (around $6.5 million in total funds), and the pilots operated during the pandemic.  So, we can’t expect big impacts yet.  But the Welsh Government has been pleased, and recently agreed to invest in an additional grant round with funds totaling approximately $4 million. In addition, discussions about a Foundational Economy 2.0 strategy are examining new ideas such as additional backing for firms in the social care sector and expanded support for food systems development.  So, this is an experiment worth watching.

We may not have called it a foundational economy strategy, but much of our immediate economic response to COVID-19 certainly looks like one.   We’ve made investments in restaurants, shuttered arts venues, ailing Mom and Pop businesses, you name it.  And these investments are paying dividends—not only in preventing business closure and saving jobs, but also in maintain community vibrancy and in ensuring that essential services, like child care and transportation, are available even in the midst of a pandemic. 

As we come out of the COVID-19 crisis, let’s not view those programs as one-off pandemic responses.  Let’s make them part of our everyday toolkit in economic and community development. 

This discussion of the foundational economy is not intended as an argument to neglect traded sectors or to no longer focus on industries that offer higher-paying jobs.  However, I am arguing that we can walk and chew gum at the same time.  We can support traded sectors, and the foundational economy.  By doing so, we not only help to create new jobs.  We also build better places that provide desirable goods and services and support better careers and lives for those working the foundational economy.

What’s New at EntreWorks Consulting?

With COVID-19 subsiding, business is picking up and we’re ready to hit the road again. We’re engaged in a number of interesting projects at the moment.  These include a region-wide workforce analysis for the Delta Regional Authority, support for development of a new innovation park at Penn State Harrisburg, and support for inclusive entrepreneurship ecosystem development in Rhode Island. 

During 2020, we upgraded our website and we encourage you to check it out. The new website also includes new platforms for the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  Let us know if the new tools are working—we always welcome your ideas and inputs.  In addition, you can still access blog updates at our Facebook and LinkedIn pages. 

We’re still not yet out on the road for work, but we hope to be out there soon.  We look forward to meeting in person at some point in 2021!

Local Government Finance and the Coming Economic Recovery:  How Will We Pay to Restart our Economic Engines?

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

www.entreworks.net

Local Government Finance and the Coming Economic Recovery:  How Will We Pay to Restart our Economic Engines?

I’ll admit that it doesn’t feel like we’re on the verge of economic recovery, but I believe that we are moving in the right direction. The good news on vaccine development and the arrival of a new Administration suggest that we may soon see positive economic news on Main Street—not just on Wall Street.   But, for many communities, the path to prosperity is going to be slow, painful and challenging.  COVID 19 was a hard hit for everybody, but it was especially challenging for distressed communities that we just digging out from the Great Recession.  These regions must now start a new recovery process with “one hand tied behind their backs,” as they need to invest in new economic development efforts while also dealing with a host of legacy challenges, many of which relate to local government budgets and revenue streams. 

This issue of EntreWorks Insights will dig a little deeper into these challenges.  It builds on our last two newsletters, which also offered suggestions for community recovery programs.  We’ll offer some additional tips, but also assess some core finance fundamentals that must be addressed if we want a recovery that “lifts all boats.” 

The Looming Local Finance Challenge

Local government finances have been crushed by the COVID-19 pandemic, and Congress’ inability to pass a second round of CARES Act funding has made things worse.   The data on local government finances are grim.  For example, the National Association of Counties has estimated that county governments have lost more than $114 billion in revenue in 2020, and city government revenues shortfalls are expected to exceed more than $360 billion between 2020 and 2022. All local governments have been hard-hit, but the pain is especially pronounced in places that rely on unique revenue sources like tourism-related taxes (e.g. Las Vegas and Orlando) or natural resource related severance taxes (e.g. West Virginia, Wyoming).   

These budget shortfalls occur at a time when demand for public services is skyrocketing.  Greater demand for services combined with fewer resources to pay for them is a recipe for trouble. Meanwhile, many local governments lack the tools or authority to raise taxes or develop new revenue sources.   For example, only 29 states allow local governments to impose a sales tax, and 26 of these states place strict limits on this authority.

A pressing set of challenges looms.  Local governments will need to fund immediate recovery efforts, such as small business support, worker retraining, and the restart of key institutions like local schools.  They will also need to begin investing in longer term recovery efforts, and in rebuilding local economies.  They will be forced to do this with hamstrung budgets, continued long-term structural problems (due to issues like pension liabilities), and limited capacities to finance this tsunami of unmet needs. 

What Does Recent History Tell Us?

I would like to say that this experience is unprecedented, but sadly, that’s not the case.  Many of America’s legacy cities have been living through this challenge for decades, as they have suffered from deindustrialization, disinvestment, discrimination, and outright neglect.  Their experiences can tell us a bit about what to do, and even more about what not to do. 

Pennsylvania is a good place to start on this journey.  Back in the 1980s, Pennsylvania was ground zero for deindustrialization, and the impact on local cities and townships was akin to the current economic impacts of COVID-19.    As steel mills and other factories shuttered, tax revenues cratered, local people moved elsewhere, and local infrastructure started to crumble.  A vicious downward spiral resulted, as local needs and costs rose while funding to fix these problems disappeared.  Dozens of once prosperous places were on the brink of bankruptcy.

The Commonwealth of Pennsylvania responded in 1987 with Act 47, the Municipal Financial Recovery Act.  Under Act 47, at-risk communities work with state agencies to hire a recovery coordinator who oversees recovery planning, and who has special authorities to reorganize municipal operations.   (Pennsylvania is not unique on this front; 19 states have similar programs focused on distressed municipalities).

Act 47 is a drastic step, but it’s sadly not that rare.  Thirty-one PA communities, including Pittsburgh, Harrisburg, Scranton, and Reading, have been in Act 47 status.  These communities account for six percent of state population.   Another 15% of the population lives in communities that are at risk of entering into Act 47 status.

Each city’s circumstances are unique, but they share similar problems. They face major legacy costs, such as pension obligations or ailing infrastructure, lack needed internal capacity, and are unwilling or unable to develop new revenue sources to close budget gaps.  Under Act 47, the community receives outside technical assistance and develops a “recovery plan” that likely includes efforts to increase service delivery efficiencies, to attract grants and other sources of revenue, and to restructure government operations.

These aggressive restructuring efforts have had mixed success.  Of the 31 communities in the program, fourteen (45%) have “graduated” (i.e., they have succeeded in creating more robust and resilient financial structures and systems).   This list includes places like Pittsburgh and Altoona, but many Act 47 municipalities have been in the program for decades. 

This essay is not intended as a sustained critique of Act 47.  It instead seeks to show that the job of rebuilding local governments is so challenging that we cannot simply rely on a growing economy to fix things.  Most importantly, the Act 47 experience can also offer useful guidance on the types of policy and program interventions that might work.

Communities that have exited the Act 47 process share a few characteristics.  Most importantly, they embrace the process and use Act 47’s “breathing room” to get serious about local government finances.  The most successful places made major cuts to services and took on tough decisions related to spending, pension liabilities, collective bargaining agreements and the like.  At the same time, they aggressively sought out new revenue sources. These sources included state grants and other supports, but also included steps like commuter taxes or new fees for service.  For example, Altoona’s main new revenue source comes from its decision to resume management and revenue of regional water and sewer systems.  Many of the successful municipalities also undertook the often-delayed and politically perilous decision to update property tax assessments. 

Much like bankruptcy status, Act 47 and similar programs provide communities with breathing room that, in theory, allows them to make tough decisions and restore fiscal balance.  But they also require that local officials be willing to make tough decisions in terms of personnel, agency budgets, and local taxes.  

Building the Road as We Travel

The data on Pennsylvania’s experience with municipal financial distress tell us that it’s very tough to fix these structural finance problems.  Most places cannot do it without outside help.  That was true in the 1980s when Act 47 was created, and it’s going to be true over the next decade as communities plot their recovery from COVID-19.  If distressed places are not given a chance to address historic structural and economic challenges, their prospects for recovery are limited.

We can and should do better.  We don’t need to “rescue” these places, but we need to help them take control of their own destinies.  And, they can only do this if their fiscal house is in order.   Several strategies can help get them there: 

Create Warning Systems for Local Economic Distress

Programs like Act 47 have shortcomings, but they have succeeded in creating early warning systems for municipal distress.   These early warnings help ensure that state governments can offer assistance before it’s too late, and that critical outside investments in local capacity are available.  All states should embrace programs of this sort, and guidance on what works for effective early warning programs can be found here.  These systems will be especially important in states like North Dakota, Wyoming, and West Virginia where tax systems remain too dependent on revenue from energy-related development.

Update Local Tax and Revenue Structures

In economic development planning, we often encourage communities to embrace economic diversification as strategy for economic resilience.  Diversity in revenue sources is similarly important.   Too many local governments are too dependent on a single source of revenue—typically property taxes.  A more diverse set of funding streams is needed.   Potential examples might include fees for service or for specific programs, such as recreation services or trash removal. 

Updating these revenue streams will require courage from local leaders who will likely be accused of raising taxes.  It also requires that state governments become more flexible in terms of both mandates on local governments and restrictions on local authority to raise needed revenues.  My home state of Virginia is one of 31 Dillon Rule states, which means that local government can only exercise powers granted by state government.  In practice, this means that local governments have little or no prospects for creating new revenue streams.

Local fiscal reform will be especially important in smaller rural communities, and in many Western states where tax structures are especially antiquated.  Researchers at Montana’s Headwaters Economics have done excellent work detailing these challenges, and their research is well worth checking out. 

Embrace Regionalism

In many places, local governments are too small to generate needed revenues or to provide the full range of needed services.  This does not mean that we need wholesale consolidation, but it does mean that local leaders must to be more strategic about what work needs to remain in-house or managed locally.  This may require outsourcing some work and embracing shared services on a more sustained basis. 

Regionalism makes sense for economic development planning purposes; it also makes sense for local government service delivery.  Challenged local governments will need to get more serious about embracing shared services with other communities, especially for high-cost services like police, fire, ambulance, and parks and recreation.  This is one means to reduce costs while still providing essential services that every resident needs and deserves.

Invest in Capacity Building

Many at-risk municipalities failed to respond to changing economic circumstances due to corruption or unqualified and poorly trained government leaders and staff.  Improving the quality of local government personnel via training and other capacity building efforts is also essential.  One benefit of programs like Act 47 is that they also provide training to local officials and bring outside technical expertise to at-risk communities. We need continued and sustained investment in programs that train local government staff members.  These programs can be based in state governments, trade associations, or in higher education institutions. 

New Tools for Community Development

Local governments need to get their finances in good order, but they also need new tools to support community development.   This is a huge topic that we’ll be covering in future blog and newsletter postings.  But, at this point, let me say that we need to think big.  We’ll need to restructure and revitalize existing programs by increasing budgets for key agencies like the Economic Development Administration, the Community Development Block Grant program, and efforts like the Community Development Financial Institutions initiative.   We’ll need to restructure existing tools like Opportunity Zones and the Community Reinvestment Act.   And, we’ll need to develop new tools, like a Local Equity Tax Credit, to generate new revenue sources for community development. 

Fortunately, there are many good ideas for moving forward here.  I’m especially intrigued with current ideas coming from the Urban Institute, the Legacy Cities Initiative (Lincoln Institute for Land Policy), and the Council of Development Finance Agencies.   These groups have developed excellent policy platforms for how to do community development finance better!

Even if the COVID 19 vaccine rollout works at maximum efficiency and effectiveness, we still have a long road ahead for economic recovery.   As this process continues, we should also ensure that all local communities can participate in the recovery process.   They can only do so if they have the capacity and resources to invest in this work.  Local government fiscal reform may not be a sexy topic, but it’s one that we desperately need to address. 

What’s New at EntreWorks Consulting?

We spent part of our COVID quarantine focused on a long-delayed update and refresh of the EntreWorks Consulting website.  We hope you like the new and improved site, developed with excellent support from Coal Creative, an innovative web design and communications firm based in Wilkes-Barre, PA.  I can highly recommend them—-they do great work!

The new website also includes new platforms for the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  Let us know if the new tools are working—we always welcome your ideas and inputs.  In addition, you can still access blog updates at our Facebook and LinkedIn pages. 

We wish happy holidays to you and your loved ones, and look forward to meeting in person at some point in 2021!

Attracting and Retaining Talent Post-Pandemic: Ideas for Smaller Communities

Now that the worst of the COVID-19 pandemic appears to be subsiding, pundits are opining on trends for the post-pandemic world. The “great reshuffling” is a common theme, where it is argued that Americans, especially younger talented workers, will be moving out of dense urban centers to rural places and smaller metro areas. I’m not fully convinced that we’ll see a great Migration, but I do expect that the calculus for talent attraction and retention will be different. And, that matters a great deal as talent was the number one issue for economic developers before COVID-19 hit, and it will remain so in 2020 and beyond. This issue of EntreWorks Insights offers some early ideas on what small to mid-sized metros and rural communities might consider as they develop new talent attraction and retention strategies.

Even if the projected great reshuffling is more of a minor reshuffling, the post-pandemic economy will likely prompt many younger and high-skilled workers to reconsider where they live. Many communities, especially smaller rural places stuck in demographic stasis, don’t require a major influx of new people. Even a small in-migration can have a big impact on local economies and on key institutions like schools. These new residents bring new energy, new ideas, new resources, new perspectives, and new money that can and should be a part of economic recovery and revitalization.

How to proceed? What can your community do to encourage talented people to consider relocating to your town, and, most importantly, to make the move and build a life there? Successful strategies should embrace the “3 A’s”: Attachment, Anchors and Amenities. Attachment refers to emotional connections. How can you create an emotional bond that makes people embrace your community? Anchors are core economic, physical, and social foundations that tie people to a place. They typically include a good job, housing, education, and social connections, such as church. Amenities are something like service offerings. What can people do in your community?

Let’s dig a little deeper into the 3 A’s:

Attachment

In the world of economic development, we often underemphasize the importance of emotional connections to place. Our maniacal focus on job creation means that some places have good jobs that are going begging because the community lacks emotional resonance for outsiders.

Building this kind of emotional connection is not straightforward.  Most people have an emotional connection to the place where they grew up.  That’s why states like Iowa and South Dakota correctly focus their talent attraction strategies on former residents. However, most places will need to think beyond simply encouraging their local diaspora to consider returning home.

An interesting new Knight Foundation/Urban Institute survey offers some useful insights about the factors that contribute to community attachment.   The study focused on cities, but offers useful insights for all types of communities.  Several factors proved most important in helping people develop a strong emotional attachment to their community.  Not surprisingly, the most important factor was spending time there, i.e., visiting sites and amenities and engaging in community activities.  These factors are especially important in determining connections between suburbs and core urban areas.  Suburban residents who regularly visit and spend time in the core parts of the city are much more emotionally attached and invested in the community.

Quality of Life is also regularly cited by residents as a key factor in their location decisions. Of course, each of us defines quality of life in different ways. A city’s existing residents offer a somewhat unfocused definition, but folks who move to a new community tend to be more specific in their survey responses. Among other things, they cite access to housing and specific neighborhood amenities as the most important quality of life factors.

The basic conclusion from this research is pretty simple: attachment depends on engagement. Current or potential new residents need to participate in the life of the community. This may take a passive form of visiting sites or attending festivals and events, but it should also take more active forms of participation in community organizations and in decision making about the community’s future.

Anchors

As the term suggests, anchors are what truly connects someone to a community. Family and affinity networks, based at churches or social groups, are important anchors, but, from an economic development perspective, jobs and housing are most important.

Economic developers certainly understand the importance of jobs as that has been our primary focus for decades.   Yet, the job equation is changing.   Talented workers won’t move for a job alone; they seek attachment and amenities as well.  This is especially true of the younger millennial and Gen Z cohorts and has been well-covered in books like The Big Sort and other studies.

Two aspects of these location decision patterns deserve attention going forward.  First, we need to pay more attention to providing jobs and career opportunities to talented workers and their partners.  This need is especially critical in rural regions, where labor markets may offer fewer opportunities for spouses or partners, even if one member of the couple lands an excellent job.   Greater attention must be paid to creating rewarding careers for both partners.  Here, as we’ll discuss further below, the rise of remote work offers tremendous promise.  Rural health providers have been dealing with these challenges for many years, and we can learn a lot from their experiences.

The second set of issues relate to housing, including both affordability and the limited range of housing options available in many rural locales.   Most rural places have limited housing stock that is both available and desirable for talented workers and their families who might consider relocation.  A recent study estimated that only 3% of existing rural housing stock is available for purchase or rent.  (The study did not assess the quality of this housing stock). In my experience, these smaller towns typically have inventory that includes a mix of low-quality entry-level housing and higher-cost high-end housing.  But, they have limited inventory in the middle for new or growing families.  Without an attractive place to live, talented workers are unlikely to make the big step of moving to a smaller, more rural community. 

Amenities

Attachment and Anchors are the things that really matter. Amenities matter too, but they are something of an icing on the cake. Let me give a personal example. I happily reside in Arlington, Virginia, and I am regularly impressed by the quality and efficiency of government services (e.g. garbage, parks and recreation) that we receive here. I value this amenity, but I’m not sure that I would move here to get it. I’m anchored here due to a house, a job, and the fact that we raised a family in Arlington. I like getting efficient government services, but they aren’t the primary factor in my location decision. And, I probably can’t convince you to move here because our utility services are efficient.

Nonetheless, amenities like good government services, great restaurants, parks and trails, are a core part of the talent attraction/retention equation. And, as we noted above, people get attached to communities when they actively use and benefit from local amenities.

Easy access to amenities, not their simple presence, is most important to potential new residents. Here, our society’s many divides come into play, as minority residents regularly report that many local amenities, such as arts and culture events, exist in their community but are not easily accessed.

The Knight Foundation/Urban Institute survey identified a number of amenities that were deemed most closely linked to building community connections. These included a safe place, access to recreation, family amenities, and easy access to arts and culture.

Some Strategies to Consider

How can your community develop a talent strategy focused on the 3 A’s of attachment, anchors, and amenities? Here are a few ideas to consider.

Embrace Remote Work

Attracting talent and providing rewarding work to professional individuals, couples, and families will depend to a large extent on how communities embrace and support remote work opportunities.  Making it easy to work remotely must be a core part of any talent attraction strategy.  Of course, this requires excellent broadband as a necessary foundation.  But, more is needed. 

This strategy to embrace remote work can take multiple forms.  Small subsidies to help local businesses and workers move to remote work are one approach that has been embraced by Utah’s Rural Online Initiative.  Providing partner and spouse job search coaching, with a focus on remote work, should also be considered.   In addition, communities should market themselves as a great place to work remotely.

Some states and regions are taking this effort even further and offering direct subsidies to potential transplants.  Vermont’s Remote Worker Grant Program has received a great deal of publicity, and similar programs are also operating in Tulsa and Northwest Alabama.

Build “Third Places”

It’s likely that your existing or potential remote workers don’t want to always be remote, and are hungry for community and connection. Offering opportunities to network and connect should also be part of your policy and program mix. Communities should consider creation of local independent worker networks that include regular events, happenings, and professional development opportunities.

In addition, consider development of “third places,” such as coworking spaces or other community meeting places, where remote workers and others can connect, network, and do work.  This desire to connect will likely be even stronger in the aftermath of COVID-19 so creation of a convening place can be a powerful tool to attract and retain remote workers.   These spaces build community (enhancing attachment) and are an important amenity as well.  I’ve recently worked in a number of small towns that are building these kinds of spaces, including the soon-opening Pantheon in Vincennes, IN and the Stourbridge Project in Honesdale, PA.   These places provide essential business and workforce services, but are also intended to be a hub for the local community.

Focus on Housing

Most small towns and rural places need more and better housing across the board. This means greater investment in housing maintenance and upgrades and in the production of new housing. This latter step will require a multi-pronged approach that will require creation of new funding streams, such as more dollars to rural Community Development Financial Institutions (CDFIs) and increased mortgage lending from rural banks, to finance new construction. Some incentives to support developers, or at least to attract construction industry talent, may also be needed. Finally, communities should review and scrub local zoning and permitting practices to ensure that local rules are not impeding new developments that are appropriate to local needs and the local landscape.

New Mexico is testing out some new ideas on this front.  It has embraced the national Teacher Next Door program to develop a housing grant system for teachers.  It is designed to attract teachers to rural schools by offering housing subsidies.  These strategies, focused on government workers, police or fire department personnel, are gaining more traction in communities and deserve a closer look.

Invest in Amenities

While anchors matter most, amenities deserve your attention too.   This is especially true as they relate to attracting remote workers.  In recent years, Boulder CO has been the US location with the highest share of remote working.  I doubt that this fact relates to good broadband access in Boulder, even thought that does matter.  Boulder is full of desirable amenities that make it a nice place to live.  If you build a nice place to live, you’ll likely do a good job of attracting and retaining remote workers as well. 

Rural communities are getting this message, and excellent programs abound across the US.  The Indiana Uplands region has embraced this work in a big way via its Regional Opportunities Initiative (ROI) program which has funded a series of county-level strategies focused on quality of place and workforce attraction. 

Open up Leadership Opportunities

Attachment depends on engagement, and real engagement is about more than attending a festival or arts event.  Small communities should do more to open their community leadership groups to newcomers.  Far too many places have economic development boards and other leadership groups with boards that have the same rosters for decades.  We need to shake things up and engage new people—from all walks of life—into community decision-making.  This will create community attachment, but, most importantly, it will likely lead to better community decisions too.

What’s New at EntreWorks Consulting?

I won’t say things are “back to normal,” but we’re now engaged in some interesting and rewarding projects.  This includes providing support the US Small Business Administration’s Office of Continuous Operations and Risk Management, which is helping to lead the agency’s COVID-19 response efforts.  We’re also kicking off new projects in Indiana and Northeast Pennsylvania.   My road-tripping work for speeches and presentations is on hiatus, but I will be teaching the North Carolina Basic Economic Development Course in early August, and will continue to post other webinars on the EntreWorks blog.

We hope to move forward with a much-needed webpage revamp and refresh in the coming months.   We also continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.  Recent posts have discussed  scenario planning, the gig economy, and other timely issues of the day. You can also access blog updates at our Facebook and LinkedIn pages. 

The Long and Winding Road: Recovering from the Coronavirus Crisis

As we wait out the resolution of the Coronavirus crisis, I’ve been closely following various pundits and experts as they offer their perspectives on how to respond and how the pandemic will come to an end. While tempted, I don’t intend to offer my own take on what’s happening now. I’m willing to admit that I have no clue, and I’m just as confused and scared as the next person. However, I do have some experience and expertise when it comes to how communities recover from economic shocks over the long-term, whether from a natural disaster, a unique event (such as a military base closure), or from a major industry downturn (e.g. the ongoing decline of the coal industry). In this issue of EntreWorks Insights, I take a crack at what communities can and should do to ensure that they recover as quickly as possible from the current COVID-19 triggered economic downturn.

None of us have been through something like the current COVID-19 related economic shock, but its impacts have some similarities to past economic shocks.  The best place to get started is an excellent 2017 book, Coping with Adversity:  Regional Economic Resilience and Public Policy.  In this work, the authors assess how every US metropolitan area has responded to economic shocks over an extended period from 1978 to 2014.  This dataset includes events such as the downturn of the steel industry, the Great Recession, the 1980s savings and loan crisis, the 2001 dot.com crash, and numerous natural disasters

This history suggests that economic shocks are unavoidable—at some point, every community faces some kind of major downturn. While we can’t avoid shocks, we can build resilient communities that recover quicker and better. In general, most communities do recover. In fact, 47% of affected communities recover fairly quickly. Another 36% of affected regions recover, taking an average of 2.9 years to replace lost jobs and economic activity. But, sadly, 17% of regions stagnate, and never really get their economic mojo back.

So, the challenge going forward is how to ensure that your region avoids stagnation and decline, and instead thrives and recovers. Here, we have a good amount of information and evidence about what makes regions more resilient and better able to recover from economic shock, even from intense events like COVID-19.

There is no “secret sauce” for economic resilience. It’s based on doing the basic blocking and tackling of good economic and community development, with a dual focus on both the short and long term. Where possible, fill gaps and address immediate needs. But also embrace the art of the long view by investing in core infrastructure and talent development.

Three key sets of policies are associated with effective community recovery strategies. Talent development is job one, so continued and expanded investments in workforce and education programs are essential. Recovery occurs when talented people build great companies who generate new jobs and new wealth for the community.

A related set of strategies focuses on improving the competitiveness of local firms.   Enhancing the local talent base will help here, but firms will also benefit from strategies that help them capture new markets, develop new products and services, and learn new skills.  We have lots of excellent programs in our toolkit already.  These include Federal programs like the Manufacturing Extension Partnership, which provides consulting support to small manufacturers, the Small Business Development Center network, and various export promotion programs that help firms identify and capture new global markets.  At the local level, various Business Retention and Expansion (BRE) programs help provide opportunities to check in and invest in strengthening local companies. 

These long-standing programs may not be new or sexy, but they have a proven track record and a great return on investment in terms of new job and wealth creation. Finally, resilient regions invest in amenities largely as a corollary to local talent development efforts.  Amenities can take many forms, such as excellent local infrastructure, recreation facilities, great schools, and the like.  The COVID-19 crisis has made it clear that broadband is the missing amenity in many rural locales, and closing this gap needs to be top priority for any underserved location.

Finally, resilient regions invest in amenities largely as a corollary to local talent development efforts. Amenities can take many forms, such as excellent local infrastructure, recreation facilities, great schools, and the like. The COVID-19 crisis has made it clear that broadband is the missing amenity in many rural locales, and closing this gap needs to be top priority for any underserved location.

Unfortunately, we are still in the disaster phase of the current COVID-19 crisis, and current measures to save jobs, help distressed families, and save lives must be our current top priority. But, we will get through this, and we will need to rebuild and revitalize our local economies—hopefully in a manner that lifts all boats and builds more resilient regions along the way.

Going forward, we’ll need a strong policy toolkit that should include the following priority items and investments:

1) Robust Investments in Core Business Assistance Programs: If we’re indeed serious about helping business recovery, we need to back our intentions with real money. That means major new infusions into the Federal business support toolkit, with big budget increases for programs run by MEP, SBA, EDA, USDA, and others. In addition, state and local government efforts will need additional support that can quickly deployed through existing program infrastructure, such as the Community Development Block Grant (CDBG) or the Community Development Financial Institutions (CDFI) program. All of these programs have a proven track record, and can provide an essential lifeline to struggling businesses.

2) Digital Infrastructure Fund: America’s rural broadband gap was a disgrace prior to the COVID-19 crisis.  We now have many American communities where children must forego basic education because they don’t have internet access.   Going forward, this must end. We will need to support a digital infrastructure fund that finally treats broadband as truly essential infrastructure.  This is the right thing to do, but it also matters for national security, personal development, and community health.  Just as the national highway system was developed (in part) to enhance national security, we must build out our digital infrastructure for larger national purposes as well.

3) Renewed Commitment to Localism: We’re definitely going to see a continued return to localism and an emphasis on supporting local business. I plan to write more on this topic in coming weeks, but here I’ll just highlight one idea: Building Third Places.

As more people work from home or pursue independent work, the hunger for connections will also grow. Local economic developers should invest in third places where home-based workers can convene, connect and collaborate (in safe manner, of course). These new third places, which might be coworking sites or other convening spaces, will serve as a lifeline for local workers and help to build stronger business networks as well. (I discussed this topic in previous EntreWorks Insights here).

4) Reshoring and Supply Chain Resilience: Major global firms were already rethinking the globalization of supply chains before COVID-19, and efforts to reshore and secure supply chains will only accelerate further now. Economic developers will need to better understand where local companies already fit or could fit in new supply chain structures.

5) New Thinking about Talent Investments: Prior to COVID-19, most of our discussions on talent development related to training and education. That emphasis will remain relevant, but we’re also going to have to think more broadly about how to provide a stronger social safety net for workers, especially those engaged in the gig economy or the independent workforce. Communities and regions might consider their own social safety net programs (e.g. such as housing or health care support or subsidies) as one means to attract or retain talent. Investments in community amenities (as noted above) will also be a core part of these talent-focused strategies.

In the past few weeks, I have received hundreds of emails about various resource websites related to COVID-19.  So, I’m reluctant to add to that list.  But, if you’re looking for resources on long-term economic recovery, check out the OECD’s useful sites on how its member nations are responding to the crisis.  The compilations on small business support programs and social policy are especially helpful.  The Urban Institute and Upjohn Institute and Restore Your Economy also support good resource sites on longer-term recovery strategies.

Be safe, be healthy, stay home and wash your hands!

What’s New at EntreWorks Consulting?

Normally, I like to fill this “What’s New” section with my current and upcoming travels and new business engagements. Sadly, much of that fun and rewarding work has been overtaken by events. And, probably like you, I’ve been hunkering down at home, trying to stay busy, and hoping for the best. As the essay above suggests, I remain optimistic about the long-term prospects for community revitalization, and that hope will drive my work—and my life—in the coming years.

We hope to move forward with a much-needed webpage revamp and refresh in the coming months. We also continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog. Recent posts have discussed the new approaches to layoff aversion, food systems, the gig economy, and other timely issues of the day. You can also access blog updates at our Facebook and LinkedIn pages.

Some Holiday Book Ideas

Back in the day, I wrote a weekly e-newsletter for many years, and, in that role, I regularly produced a recommended books issue around the holidays.  I’ve sometimes plugged new books in the EntreWorks blog, but I’ve decided to revisit and upgrade this tradition and offer some tips for the 2019 holiday season in the latest EntreWorks Insights.  This book list is wonky, but it should contain some fun and insightful reads for anyone who’s interested in community building and economic development.   All of the list books are new(ish) and can be purchased at major outlets, preferably at your local independent book seller!

Making Sense of Incentives:  Taming Business Incentives to Promote Prosperity:  Timothy Bartik.  The big national competitions to land Amazon HQ2 and Foxconn have triggered a healthy public debate about the utility—or lack thereof—of economic development incentives.   Bartik’s new book is thus extremely well-timed.  This is the most comprehensive and common sense book on incentives that you can—and should—read. Even better—it’s short and free for download at the Upjohn Institute’s website.   Bartik is rightly critical of many incentive packages, and especially about the supposed multiplier effects of many projects. But, he doesn’t just criticize. He offers concrete suggestions for when and how incentives have the best opportunities to work.   To sum up quickly, incentives should only be used when they attract new wealth and new jobs that will stay anchored in distressed communities, where non-cash incentives (such as investments in training) are more prevalent, and where rigorous systems to evaluate outcomes and impacts are in place.

Jump Starting America:  How Breakthrough Science can Revive Economic Growth and the American Dream:  Jonathan Gruber and Simon Johnson.   The US has been under-investing in science and R&D since the 1970s, and it’s no surprise that the overall slowdown in our economy started about that time.  Gruber and Simon argue that future prosperity depends on our willingness to reinvest in science and technology base.  This won’t be done by corporations—it requires big dollars (more than $100 billion per year) in public science investments with a focus on “spreading the wealth” to diverse regions across the US.  The specifically identify 102 “Places for Jump-Starting America,” regions with the population and talent base to potentially emerge as a new technology hubs.  This list includes places like Albany NY, Fort Wayne IN, Omaha NE, and Boise ID.  They advocate for a strategy that not only lifts the entire US economy, but that also ensures that the benefits from these investments spill over to more communities around the country.

Community Colleges as Incubators of Innovation:  Rebecca A. Corbin and Ron Thomas (eds.).  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.

Growth: From Microorganisms to Megacities:  Vaclav Smil.  This one is a challenging but worthwhile read.  Smil is what we might call a “big thinker.”  He has written some excellent works on “big topics” such as energy and civilization, and the rise and fall of American manufacturing.   Growth is similarly ambitious, examining the concept of growth and its role in driving both natural organisms and complex civilizations.  Thanks to this work, I’ve learned a bit about growth in microorganisms and in dinosaurs too.  But, the most important aspects relate to the impacts of growth in population, economies, and societies.  Smil is not a climate change doomsayer, but he does caution that there are natural biophysical limits to growth. He also urges us to deeply consider what a “post-growth” world will look like. 

Palaces for the People:  How Social Infrastructure Can Help Fight Inequality, Polarization, and the Decline of Civic Life:  Eric Klinenberg.  The last edition of EntreWorks Insights was triggered by my reading of this interesting book, which builds off earlier research into how and why certain Chicago neighborhoods saw higher mortality rates during deadly heat waves in the mid-1990s.  The short answer is that the better prepared neighborhoods had higher levels of social capital, triggered in part by local community centers—in churches, libraries, and other locations—where local people could convene and hang out together.  Palaces for the People digs deeper into these trends and shows how building “third places” for local connections builds healthier and more prosperous communities.

Strategic Doing:  Ten Skills for Agile Leadership:  Ed Morrison, Scott Hutcheson, Elizabeth Nilsen, Janyce Fadden, and Nancy Franklin.  I’ve been a friend and follower of these authors for many years, and have long been impressed with how well their strategic doing methodology can help communities move in new directions.   After many years of field testing, they’ve shared their ideas and concepts in this excellent guide.  I like this book for its community building insights, but it offers practical guidance for almost any effort where a group of people need to work collectively to address a complex problem or challenge.

Legacy Cities:  Continuity and Change Amid Decline and Renewal:  J. Rosie Tighe and Stephanie Ryberg-Webster (Eds.):  I grew up near what we might deem a legacy city (Reading, PA), and I remain concerned that many of these former industrial centers still face challenges that date back to the early deindustrialization of the 1970s and 1980s.  While many big cities are thriving, small to mid-sized cities, like Youngstown OH, Racine WI, Stockton CA, and Trenton NJ, are still striving to return to economic prosperity.  This edited volume examines the myriad challenges facing legacy cities, who must not only create new jobs and new businesses, but also deal with legacy costs such as blighted buildings, decrepit infrastructure, aging populations, and so on.  This volume focuses on trends in Northeast Ohio, but offers relevant lessons for other legacy cities as well. If you’re interested in this topic, you should also peruse a new and excellent November 2019 Brookings Institution report on small and mid-sized legacy cities.

The Making of a Democratic Economy:  How to Build Prosperity for the Many, Not the Few: Marjorie Kelly and Ted Howard.  The folks at the Democracy Collaborative have been hard at work in promoting a more open and inclusive economy.  They may be best known for their work in developing Cleveland’s Evergreen Cooperatives or in supporting creation of the UK’s Preston Model, but they also publish useful work on employee ownership, anchor institutions and community wealth-building. This book summarizes their work and is an excellent introduction to new thinking about how we can build more inclusive economy.

What’s New at EntreWorks Consulting?

We’re closing out the year on a busy note—which is a good thing.  We’re continuing to work on current projects in Southwest Indiana, Central Virginia, Northeast Pennsylvania, and in continuing work supporting the Pentagon’s Office of Economic Adjustment. We also continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.  Recent posts have discussed the new approaches to foundation program investments, coal communities, small business impact data, the gig economy, and other timely issues of the day. You can also access blog updates at our Facebook and LinkedIn pages. 

The Power of Place in Economic Development

I recently read the sociologist Eric Klinenberg’s new book, Palaces for the People:  How Social Infrastructure Can Help Fight Inequality, Polarization, and the Decline of Civic Life.  This work builds off Klinenberg’s earlier research into the 1995 Chicago heat wave, which killed hundreds of elderly and at-risk people.  In that work, he found that victims tended to be poor, isolated, and concentrated in a few neighborhoods.   Yet, some neighborhoods with similar demographics saw few deaths.  He found that these latter places had stronger social capital.  Instead of being isolated, senior citizens in these places spent more time in community centers, churches, libraries and other social settings.  Social capital mattered in this case, and we know it can also matter for economic development.  In the new book, he digs deeper into a related question:  can social infrastructure contribute to social capital, and to improved economic development outcomes?

This line of reasoning interested me as we’ve recently been engaged in several consulting projects focused on community facilities such as a potential new college campus, a local innovation hub, and a new business incubation/acceleration facility.   These locations will certainly serve as places where community and business services are offered, but can they have wider community impacts?  Klinenberg certainly thinks so—his book is full of great stories about the positive impact of programs at local libraries, school buildings, and the like.

My experience tells me that, if done right, economic development-related buildings and facilities can have similar positive effects.  But, it won’t happen on its own.  Community benefits need to be a conscious part of the planning process for new and upgraded facilities and offices.  Let’s look at a few options:  what kinds of places and facilities can be tweaked to generate better social capital and hopefully better community and economic development processes and outcomes?

Economic Development Offices

I’ve visited hundreds (if not thousands) of economic development offices around the world, and they are rarely exciting or stimulating places to visit.  Staff and leadership may be interesting, but the spaces are generally pretty blah.  Tight budgets and public scrutiny often prevent economic development organizations from making splashy investments in office space, but I believe that EDOs are missing a big opportunity on this front.  If and when possible, EDOs should seek to find a more permanent home in a central location where they can become rooted in the community and where their facilities can be shared for community meetings and events. 

The decision to own your own space requires some soul-searching and difficult financial choices. Yet, if it’s feasible, it offers many benefits.  EDOs can now serve as a community anchor.  They can open their offices to community groups and better engage with local residents, and, along the way, they become a vital community hub.  Making this investment also sends an important message that your community is a good place to do business.

Shared Office Space

Coworking facilities and shared office space are another option.  A coworking boom is underway and some have termed it “the new normal.”  Today, there are more than 22,000 coworking spaces worldwide.  In urban centers, companies like WeWork have become major players in the commercial real estate market, and the wider community benefits of coworking may be less profound.  But, in smaller communities and neighborhoods (both urban and rural), coworking spaces should be viewed as community building anchors. 

The benefits of coworking are clear.  Local residents and entrepreneurs reduce isolation, build community, do business together, and become better business owners along the way.  Communities benefit from these networks by retaining and engaging talent, supporting the startup and growth of new companies, and capitalizing on the social capital generated by coworking.

We’re now seeing a big boom in rural coworking where sometimes isolated entrepreneurs are building thriving ecosystems and networks. Some rural regions, like New Mexico, are even using these sites to develop remote work centers.  Other projects worth checking out include the Stourbridge Project (Honesdale, PA), 20 Fathoms (Traverse City, MI), or Indiana’s LaunchFishers.

Coworking connects freelancers and entrepreneurs, but it can also connect non-profits and social ventures as well. Many communities have found great success by creating non-profit centers that house multiple charitable organizations or individuals working on social ventures.  Many of these efforts serve a diverse mix of organizations.  Examples include San Francisco’s Tides Center or Toronto’s Centre for Social Innovation.  Other programs serve specific needs, such as the Denver-based sustainability effort known as the Alliance Center.

Community Centers, Libraries, and Other Public Locales

Public libraries are getting a lot of love these days and rightfully so—they are one of the last free public spaces in many of our communities.  Libraries (and other community centers) are being repurposed for lots of other uses, including STEM education, MakerSpaces,  small business support centers, data and technology centers and community service centers.

These spaces are especially important in rural areas, where central locations for community activity may be limited.  Here, community facilities often serve multiple purposes.  For example, in Walterboro, SC (population 6,000), the Colleton Commercial Kitchen has evolved into a community anchor, with kitchen incubator facilities, meeting space, and an adjoining café.  It has also stimulated other nearby developments.  In Paonia, CO, the Edesia Community Kitchen serves a similar function.

Innovation Hubs/Incubators

Business incubators have been around for a long time—the first US incubator dates back to the late 1950s.   However, incubators have not traditionally been part of a wider community infrastructure.  They were instead viewed as another form of office space.  That view is an anachronism today, and the best incubators position themselves as community hubs.

The best of these facilities combine a variety of functions and activities.  They offer business services and incubation programs, but they may also include coworking space, meeting spaces, regular events, food and drink, and other services too.  When done well, they become the physical embodiment of a local entrepreneurial ecosystem.  Dozens of good examples exist around the US and the world.  To get started, you might take a look at 1717 (Richmond, VA), the Innovation Depot (Birmingham, AL), 1871 (Chicago), the Commons (Denver) or the Center for Entrepreneurial Innovation (Phoenix).

Ideally, an innovation hub facility can anchor a wider innovation district.  Even here, the conception of what an innovation district does is starting to change.  At first, these districts were agglomerations of technology firms, i.e. a focused and tightly knit industry cluster.  Today, we’re starting to see a more expansive view, where forward thinking innovation districts are seeking to better link innovation and inclusion.   This happens by designing and promoting events and spaces for community along with focused programs in areas like STEM education and workforce training.  The Districts are becoming a place for everyone—not just the Ph.D. scientists and IT geeks.

What do these examples have in common?  They all use a physical space to do more than provide an office or deliver a program.  They use physical spaces to build communities.

Klinenberg’s book is subtitled “How Social Infrastructure can Help Fight Inequality, Polarization, and the Decline of Civic Life.”  It’s a tall order to think that a single building or a single program can tackle all of these ills.  Yet, at the same time, doing nothing does nothing to address these pressing community challenges.   We can do more to build community—not just in programs we provide to our customers, but in our facilities and physical spaces as well.

What’s New at EntreWorks Consulting?

We’re in the midst of a fun and interesting year so far. On the personal front, I’ve enjoyed a trip to Iceland and a cross-country road trip with my son. We’re also working on newish projects in Fort Worth, Texas, and Charlottesville, Virginia. And, among other work, we’ve just completed a strategic planning project for the Local Development District Association of Pennsylvania.

We hope to see you on the road!  We also continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.  Recent posts have discussed the gig economy, the role of public libraries, and other timely issues of the day. You can also access blog updates at our Facebook and LinkedIn pages. 

What to Do About the Rural Housing Crisis?

In recent years, a good chunk of my consulting practice has brought me to rural communities around the US.  I love this work, and seeing these interesting and beautiful places is one of the most rewarding parts of my job.  But, I also get a close-hand look at emerging economic development challenges that may not yet be on the radar screens of folks elsewhere in the country.   I want to tackle one of these emerging challenges—rural housing—in this issue of EntreWorks Insights. I am no expert on this topic, but I am regularly hearing about housing as a big impediment to economic and workforce development in smaller communities.  As such, I’ve started to educate myself on what’s happening, and I’ll share some of my early—and still developing—thoughts here.  My purpose is not to offer my own unique “solution” to the problem, but to hopefully spark more discussions about what we can and should be doing to provide more and better housing in rural communities.

Issues of housing affordability and availability are reaching a crisis point in many communities across the US.  Places like Seattle and the Bay Area get a lot of attention for their high housing costs, but housing problems are emerging everywhere today.  And, the pressures in rural America are especially intense.  Let’s dig deeper.

Housing markets are affected by three factors:  demand, supply, and affordability.  Rural America is challenged on all three fronts.  Despite the fact that urban growth is outpacing rural growth, demand for rural housing has increased in recent years.   Some rural areas, such as the North Dakota’s Bakken Shale region, saw massive jumps in population.  Other regions grew more slowly, slowly pushing up demand for new housing.   Today, the economic recovery means that many regions, especially in the Great Plains and Mountain West, need to new housing for new workers in-migrating for open jobs.

As demand has grown, supply has stagnated.  A number of causes are at work. Rural populations are older, and older rural residents often age in place.  Overall in-migration and out-migration rates are also lower.  As a result, there is limited churn in rural housing markets. 

Rural housing supply is further constrained by two other factors:  declining quality of existing housing stock and higher construction costs in rural areas. The maintenance backlog on existing residence is large.  Federal sources estimate that nearly 6% of rural homes are substandard.  Higher relative construction costs also create barriers to new construction and aggressive maintenance.   A recent University of Minnesota study found that labor shortages, increased labor costs, and higher material costs have deterred developers from building new housing in rural regions.  Finally, declines in federal rural housing programs further exacerbate this situation.

Affordability is affected by the decline in federal funding for rural housing, and is of course worsened by rising poverty in rural regions.   A recent Urban Institute analysis of rural housing challenges finds, not surprisingly, that America’s poorest regions, such as the Mississippi Delta and border regions in Texas, also have the most pressing housing affordability problems.  

As these pressures have built up, the impacts of housing challenges are affecting multiple groups in rural regions.  Certainly, impoverished families and those in precarious economic conditions continue to pay the price, spending limited funds on increasingly pricy substandard housing. Meanwhile, community economic development prospects are also at risk as states and regions seeking to attract new workers and new residents have no place to house them.  Consider a few snapshots.  In New Hampshire,   the rental vacancy rate is 1.96% and median rental costs have jumped 20% in five years.  Without new housing, the state can’t attract and retain new workers.  Nebraska and other Midwest states face similar pressures.  For example, in Platte County, NE, it is estimated that there are 990 unfilled jobs.   Yet, there are only 65 homes available on the market.  The math just won’t add up.

These housing challenges continue to wrack impoverished rural regions, while also limiting the growth options for communities that have open jobs and business opportunities.  The crisis further hurts rural regions as they cannot benefit from the economic stimulus that comes from the construction of new housing.   These impacts are sizable.  For example, a recent study in Colorado found that home building accounted for 3.4% of gross state product.  We need a new look at how we support housing development across the board—in urban, suburban, and rural settings.  As noted in this essay, rural regions face many challenges, but they are not alone.  Addressing the rural housing crisis will require a mix of solutions, and here are a few ideas that deserve more attention. 

Increase Public Funds for Housing.  It’s unavoidable that we’ll need more money to address current housing challenges.  HUD and USDA programs fund a large share of affordable workforce housing in rural America, and they are not doing enough to address the problem.  It’s been estimated that USDA could face a $5.6 billion shortfall in capital needs for its current portfolio of properties by 2024. This gap must be closed.Develop New Incentives for Rural Housing Development:   High construction costs and less well-heeled customers mean that rural housing developers face something of a “market failure.”  Their returns from building rural workforce housing may be insufficient, encouraging continued focus on urban regions or in building higher-end housing.   The range of potential incentive options is large, and should include creation of new state and local funding pools, tapping into existing programs like CDFIs or Opportunity Zones, and better utilization of other incentives such as the Community Reinvestment Act and the Duty to Serve program focused on Fannie Mae and Freddie Mac-backed mortgages in rural markets.Promote New Kinds of Housing in Rural Regions:   Owner-occupied single-family homes remain the norm in most rural places.  These traditions don’t need to change, but we do need to think about other kinds of housing options for rural regions.  New kinds of housing for seniors could be especially important—not only to provide better and safer living options for seniors, but to also open more existing housing stock for new residents and families.  Similarly, an expanded commitment to increased manufactured housing production is needed.  These types of units fill an important niche, and are a critical part of the rural housing mix.  There is lots of great work underway in this sector.  Check out the I’M HOME Network for one example.

As we continue much-needed public conversations about how to build a more prosperous America for all citizens, we must not forget that housing needs to be a key part of these conversations—not just in high cost gentrifying urban areas but in rural regions as well.  This is smart policy for economic mobility and for economic development as well. 

What’s New at EntreWorks Consulting?

We’re gearing up for a busy and interesting year in 2019.  We continue with long-standing projects for current clients, such as the Pentagon’s Office of Economic Adjustment and the National Association of Counties, and we’ve just kicked off a new strategic planning effort for Pennsylvania’s Local Development Districts. 

You’ll also be able to find Erik Pages of EntreWorks Consulting as he hits the road for various speaking engagements in early 2019.  These include upcoming talks and training programs such as:

Shepherdstown, WV:  Training for the Conservation FundArlington, VA:  Training for the National Association of Development OrganizationsReading, PA:  Presentation to the Greater Reading Chamber AllianceFlorence, AL: Presentation to Shoals Shift.

We hope to see you on the road!  We also continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.  Recent posts have discussed the gig economy, the role of public libraries, and other timely issues of the day. You can also access blog updates at our Facebook and LinkedIn pages. 

Agriculture: The Next Big Thing?

Given its eons-long role in the rise of human civilization, it’s pretty tough to speak of agriculture as “the next big thing.”  But, there is a fascinating and transformative revolution underway in the world of food and agriculture.  At the broadest level, it’s likely to change everything about how we live, but it will also create lots of interesting market trends and business opportunities in the process.  Smart communities and smart economic developers can and should try to understand what’s on the way.  This issue of EntreWorks Insights attempts to provide my own take on what’s happening.   I’m no expert on agriculture, but I’ve been in the midst of a learning adventure in recent months—thanks in part to some ongoing work on behalf of AgriNovus Indiana, the state’s lead advocate for the agbiosciences.  The good folks at AgriNovus deserve no blame for any errors I might present below, but they have inspired me about the exciting potential that surrounds the agbiosciences.

Agbiosciences is a somewhat awkward term, but it accurately captures what seems to be happening in food and agriculture-related industries where we’re seeing a convergence of innovations across several industry sectors, such as plant science, animal and human health, and high-tech agriculture or agtech.  These innovations also encompass many critical enabling technologies such as data-enabled agriculture, automation and robotics, supply chain and logistics related to food security, and biofuels and bio-based energy.

A couple of cool business concepts and technologies should further elucidate what we mean when we talk about the agbiosciences.   How about using blockchain to track beef (and other products) to ensure that it is grass-fed, organic, or comes from a certain location? Or using data analytics to determine how much water, fertilizer, and other inputs to provide for each specific plant on a farm? Or tapping into the Internet of Things (IoT) to provide farmers with real-time and historical data on how their equipment, their crops, and their fields are performing.  Or using gene editing to develop healthier and more sustainable plants?  These ideas and more are now out in the marketplace thanks to emeriging companies like BeefChain, Advanced Agrilytics, FarmMobile, and Pairwise Plants. In addition to these new firms, larger corporations, are investing in startups and fostering their own innovations too.

Three big historical trends are at work here.  First, booming populations mean a boom in demand for food and nutrition.  Feeding a planet of nearly 10 billion people (as projected by 2050) will not happen with business as usual.  We’ll need new ways to grow and manage our food resources.  These inexorable population pressures are accompanied by new consumer demands for more sustainable products and production techniques, and a host of new products, including new forms of protein (such as insects or manufactured meat), organics, and the like.  Finally, a host of new technologies, such as IoT, artificial intelligence, and genome editing, are also transforming the industry.   It’s a complicated, but exciting, period.

The potential for the agbiosciences is no secret.  Since 2012, venture capital investments in the agbiosciences have jumped by a whopping 80 percent, leading the Boston Consulting Group to predict a new “green revolution” based on “a wave of start-up activity in agricultural technology.”  This growth is impressive, but other observers suggest that more is on the way.  For example, the 2018 Global Startup Genome report notes that agtech and food companies account for less than 2% of all global venture investments, and that food and agriculture still remains one of the world’s least digitized industries.

This combination of growing market demand and exciting new technology developments means that the agbiosciences sectors are in the midst of revolutionary changes that will transform companies, communities, and our individual lives as well.  How can your region and your community capitalize?  What can you do as an economic developer to help your region become a hot-spot for agtech and the agbiosciences?  Success in these endeavors requires a deep understanding of the industry’s unique current futures.

What do producers (i.e. farmers) want and need?What opportunities exist for local companies and new entrepreneurs?What can your organization and your community do to connect producers, agtech entrepreneurs, and more established industry players?

What do Producers Want?When it comes to supporting agbioscience clusters, job 1 involves understanding what farmers want and need. Basic strategies of customer discovery and development matter for this task, but economic developers can help by working to better connect farmers to new innovations, new technologies, and potential new suppliers. 

Contrary to some claims, farmers are not necessarily risk-averse. They are willing to invest and try new technologies, but they can ill afford to take a chance on a minimal viable product with a limited track record.  New firms will need to develop real partnerships with farmers where they can test new products and share the benefits of technological improvements and cost reductions.   One-time customer transactions won’t work; mutually beneficial partnerships are needed.

What New Opportunities Exist?The current marketplace is very noisy.  It’s tough for startups to identify what farmers want and need, and farmers aren’t sure which technologies, products, or services will work best for them.  Producers need more information on new technologies, and how these new technologies can improve their operations.  At the same time, potential entrepreneurs need a better understanding of current industry pain points and where innovations from other fields, such as Big Data, can converge with ag-focused market solutions.  Better information and better networks to connect the industry are needed.  Economic developers can help cut through the noise by embracing our roles as partnership builders and network connectors.

How to Build Better Networks?Both of these fundamental market challenges can and should be addressed by economic developers and their community partners.  By becoming a champion for the agbiosciences, you help spread the word about new business opportunities and new industry developments.   The role of translator becomes critical as you advise new entrepreneurs on how to work with farmers, and help farmers to better understand the benefits of new technologies.   These connections help reduce barriers to entry for both customers and suppliers.  Farmers better understand the benefits of new technology solutions, while entrepreneurs better understand customer needs and pain points.

The actual policies and programs that seem to work best in agbiosciences support are similar to many other cluster-development initiatives. Lots of interesting work is already underway.   America’s Midwest is an important player in the field, with a strong concentration of both public and private organizations focused on the potential for massive growth in agbioscience-related business and innovation opportunities. Agribusinesses, large public and private universities and catalysts for economic development all recognize the importance of this sector. The Midwest is very competitive because of these organizations, as well as its well-established supply chains for agriculture. The Midwest, after all, is one of the most fertile crop production areas in the world, with unique advantages in transportation, processing, human capital and research and development. However, the region also suffers from a lack of equity capital and a limited base of home-grown technology companies.  These factors can create real challenges for new agtech start-ups. 

A few states and regions are doing this well.  Indiana is a leader with AgriNovus Indiana, but other state and local programs are also gaining traction.   A number of promising local and regional efforts are underway, including: 

Iowa:  Cultivation Corridor Kansas City:  KC Animal Health CorridorNorth Carolina:  Numerous initiatives including NC Biotech Center, NC State, and others.St. Louis:  Numerous initiatives around Danforth Science Center and other partners.Salinas California AgTech Hub

Most of these programs operate in a similar fashion.   They typically promote events and networking opportunities, and also serve as their local champion for the agbiosciences.   Some programs offer investment funds, and others manage accelerators to support new start-up ventures.   Workforce training and outreach to education partners are also part of the program mix.

Current efforts in St. Louis offer a glimpse of what many regions are attempting to do.    It is home to world-class research talent and facilities, thanks to the presence of the Danforth Center, major Bayer (formerly Monsanto) facilities, and the new 39 North agtech innovation district.  In Indiana, similar synergies are emerging thanks to Purdue University’s world-class research capacity, major firms like Corteva and Elanco, and future innovation districts planned at Purdue Discovery Park and Indianapolis’ 16Tech.

To date, successful regions are embracing a number of strategies that include championing the industry, connecting producers and innovators, grooming new generations of researchers and entrepreneurs, and training a new workforce for new industries.  Agriculture may be an ancient industry, but this new agbioscience revolution is going to require new approaches to industry support, development, and promotion. 

RESOURCES

If you’re interested in learning more about the coming boom in the agbiosciences, please check out the links noted above.  In addition, here are a few more worthwhile resources:

AgFunder News:  Great news sources for latest agtech industry trends.Boston Consulting Group, “Lessons from the Frontlines of the Agtech Revolution,” October 2016.Ryan Donahue, “Rethinking Cluster Initiatives:  St. Louis Agriculture Technology,” Brookings Institution, July 2018.Suren Dutia, “Agtech: Challenges and Opportunities for Sustainable Growth,”  Kauffman Foundation Research Paper, 2014.Katherine Schulman, “Agtech In the Midwest:  Creating Fertile Ground for the Next Unicorn,” M25VC, November 2017.Yield Lab:  Industry accelerator with offices in St. Louis.  Produces a useful Agtech Action e-newsletter.

If you know of other good resources, please share them by sending an email to us at info (at) entreworks.net.   We’ll share them in future blog and newsletter posts.

What’s New at EntreWorks Consulting?

We’re winding down from a busy and rewarding 2018 and looking forward to new challenges in 2019.   We’ve added several new items to the EntreWorks library:

Entrepreneurial Ecosystems In Appalachia: A series of reports and data tools related to entrepreneurship in the 13 state region served by the Appalachian Regional Commission.  All project materials can be accessed at www.arc.gov/ecocystems.  A Comprehensive Assessment of Military Installations and Impacts in Pennsylvania:  A deep dive into the economic impacts of Pennsylvania’s thirteen major military installations.“Igniting Rural Entrepreneurship:  Where do Workforce Development Programs Fit In:” Erik Pages of EntreWorks Consulting contributed this chapter to a new book series entitled Investing in America’s Workforce.

We continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog. You can also access blog updates at our Facebook and LinkedIn pages. 

What’s up in the States? 2018 Edition

American states are often termed the “laboratories of democracy,” where new policy ideas are designed and tested before they reach the national stage.   Now, this is truer than ever thanks to the gridlock in DC.  Our last edition of EntreWorks Insights took a quick look at interesting legislative ideas being considered on Capitol Hill.  You’ll likely not be surprised to know that none of these ideas has been enacted, but we can keep hoping.  Meanwhile, the good news is that state legislators from across the country have been testing—and enacting—some very interesting new approaches to economic and community development.   Below, we present a snapshot of some innovative and cool ideas that have recently been enacted by various state legislatures or introduced by Governors.  We welcome your inputs as well, so if you have other ideas to share, please send them to us at info (at) entreworks.net.  We’ll include them in our next issue.

Arizona:  Although it is gaining traction in Europe and Asia, the concept of a “regulatory sandbox” is relatively new here in the US.  Regulatory sandboxes are a means to allow entrepreneurs to test new ideas and products in the marketplace on a temporary basis with temporary rules and regulations in place.  They are designed for industries and technologies that are in the midst of massive transformations where regulatory regimes cannot keep up with the pace of technological change.  Fintech is a classic example and the sector where the regulatory sandbox concept has been tested.  Earlier this year, Arizona became the first US state to approve a fintech regulatory sandbox.  This shift should help make Arizona into a national leader in fintech innovation.  (You can learn more about the regulatory sandbox concept here.)

Colorado: Broadband access is becoming a critical component for rural development.  It’s much like the railroads in the 19th century.  Towns without rail access struggled, while their peers prospered.  A similar winnowing process may result for communities that can’t get good broadband services.  Colorado has decided to take aggressive action to level the broadband playing field for its rural regions.  In a series of bills passed in April, Colorado created a new $150 million fund to invest in rural broadband, and also opened up rural markets so that incumbent providers would face more serious competition for this business.  The package also set minimum standards for defining “high speed broadband” and created new mechanisms for communities that want to sponsor their own public broadband systems. 

Michigan: The Michigan Legislature is currently considering Governor Rick Snyder’s proposal known as the Marshall Plan for Talent.   Like its post-World War II namesake, Michigan’s talent Marshall Plan thinks big.  It proposes spending as much as $100 million on a series of talent development efforts, such as vocational training, scholarships, business-education partnerships and the like.   The basic concepts in the Marshall Plan are not necessarily new, but Michigan is seeking to tackle its talent development challenges in an inspiring, holistic, and comprehensive fashion.Utah:  In 2017 and 2018, Utah has made a big push to promote rural development via its Rural Jobs Initiative, a plan to create 25,000 new jobs in rural Utah over four years.  This effort is now in its second year, and offers a variety of tools to stimulate rural development.  These include employment and training incentives, and the establishment of Rural Investment Companies (RICs) for specialized investments in the Utah’s rural entrepreneurs.

Vermont:   Many regions of the US are facing labor shortages, but Vermont is facing a worker shortage on steroids.   Vermont has very low unemployment, an aging population, and faces projections of continued population loss.  Something has to give, so Vermont has decided to get creative in attracting and developing new workers.  The Vermont Talent Pipeline is an effort to work with employers to identify challenge areas and to design new training programs to address these needs.   This pipeline model is being used in several other states, and is built on strategies first developed by the US Chamber of Commerce Foundation.  Meanwhile, the state’s Department of Tourism and Marketing is also trying to help, building on Vermont’s role as a tourism mecca.  “Stay to Stay” Weekends is an effort to encourage tourists to visit, and to stay! Visitors don’t just get to see the sights; they also get to meet with local leaders and get a flavor of what it might be like to make a new life in Vermont.

Wyoming:  We’ve blogged in the past about ENDOW Wyoming, which is promoting a whole host of new ideas to help diversify Wyoming’s resource dependent economy.   The Wyoming Legislature passed many ENDOW proposals this year.  Here, we’ll highlight Wyoming’s move to become a global leader in blockchain technologies.  In March, the Legislature passed a package of bills to ease regulation of these new technologies.  Among other things, the legislation exempts cryptocurrencies from state securities laws and from property taxation. They also allow businesses in Wyoming to use blockchain as an approved recordkeeping method.   Industry experts note that the new rules make Wyoming the most blockchain-friendly state in the US.

I’m extremely inspired by all of these ideas.  Like all experiments, they’re not all guaranteed to succeed.  But they remind us that the laboratories of democracy are still in business!  We’ll provide further updates in future issues of EntreWorks Insights.

What’s New at EntreWorks Consulting?

We’re enjoying a busy and fun 2018.  In addition to ongoing projects, we’re engaged in two interesting new efforts:  a community development plan for Wayne County (PA), and an entrepreneur ecosystem assessment for AgriNovus Indiana.   Erik Pages also has numerous speaking engagements over the summer and into early Fall.  He’ll be teaching parts of the North Carolina Basic Economic Development Course in late July, and will also be presenting at the annual meetings of the International Economic Development Council (Atlanta) and the Community Indicators Consortium (Minneapolis).

We continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.   Recent posts have discussed new research on regional resilience, global startup ecosystems and economic development success in America’s micropolitan areas. You can also access blog updates at our Facebook and LinkedIn

Legislative and Policy Roundup: 2018 Edition

Back in the day, we used to produce regular policy and legislative updates that provided our perspectives on the latest ideas gaining traction on Capitol Hill and in the Administration.   As Washington bogged down in partisan bickering, our energies flagged.   Tracking new bills seemed unnecessary if nothing was going to get passed or enacted.

I’ve decided to skip the complaining and cynicism in this edition of EntreWorks Insights by providing a new and improvedJ look at what’s happening with policy and legislation related to economic development, innovation, technology policy, and the like.   I’m still somewhat skeptical about the prospects for major new legislation, but it is always a useful exercise to assess what ideas and proposals are gaining traction on Capitol Hill and beyond.   When the political logjam breaks, these are the ideas and concepts that will be at the front of the policy queue.  They will be the proposals most likely to succeed!  As such, it is instructive to assess what’s on front burner today.  If you agree, please read on . . .

Recently Enacted Programs:  Potential Tax Bill ImpactsWhile most media attention has focused on budget debates, Congress and the White House have actually passed a few things in the past year.  Of course, there’s tax reform which should have a profound impact on the US innovation economy.   I’m no tax expert, but I can offer a few observations.

Over the short term, tax changes should put more cash in the hands of large and small businesses, and that hopefully generates new investments. The new tax rules do generate benefits for independent workers who opt to create pass-through companies, so we might also expect it to accelerate ongoing growth in the gig economy. Meanwhile, limits on the state and local tax deduction will create further budget pressures in states with higher state rates.  This may, in turn, put pressure on state and local economic development budgets going forward.

For economic developers, the new Opportunity Zone program, created as part of the tax reform package, is worth a look.  The zones are a new incentive program to encourage investment in low-income communities.   Rules and regulations for the program are still under development, but the basic outlines are as follows.  State and territory governments will designate up to 25 percent of their distressed areas as potential Opportunity Zones.  After this designation, private investors in these communities will be eligible for several tax incentives, including capital gains tax deferrals and a permanent exemption for certain categories of capital gains income.   This concept has great potential to spur investments in distressed communities across the US.  States are now in the process of identifying potential Opportunity Zones so now is the time to get engaged!

New Legislative Proposals

For folks working in economic development, the big debates this year will likely revolve around the Trump Administration’s proposed infrastructure plan, reauthorization of the Farm Bill, and reauthorization of the Higher Education Act.  We intend to cover these debates in future newsletters and blog posts.   Below, we present some other recently introduced bills that have triggered our interest.  It’s unlikely that any of these measures pass as stand-alone bills, but they do have the potential of being included as amendments to larger legislative packages that make their way through Capitol Hill.  They also offer useful insights about what’s currently on the minds of our Senators and Representatives.

Workforce/Talent

Community College to Career Fund Act (S. 620):  This proposal, from Sen. Duckworth (D-IL) and others, creates new programs that expand business-higher education partnerships around in-demand career pathways.

Portable Benefits for Independent Workers Pilot Program Act (S. 1251/H.R. 2685):  Sen. Warner (D-VA) has been a national leader in thinking about how to support the gig economy.  This bill authorizes a small grant program to invest in pilot projects that provide portable benefits to gig economy workers.  It offers a means to test the best approach to strengthening the social safety net for the independent workforce.

Gateway to Careers Act (S. 2047):   This bill seeks to expand career pathway programs by providing new funding for partnerships between community colleges, universities, and employer in in-demand sectors such as manufacturing and health care. It is targeted to unemployed or underemployed people facing barriers to obtain new credential or education.

Investing in American Workers Act (S. 2048):   Like S. 2047, this bill calls for a comprehensive rethinking of how we do skills training in the US.  It would create a new tax credit (of up to 20%) to employers to help defray the cost of training new and incumbent workers.

Innovation and Entrepreneurship

The Startup Act (S. 1827):  I’ve blogged about this bill before as it’s been introduced a number of times in the past.  It was a good idea the first time, and it’s still a good idea.  Its main plank provides fast track visas for high growth entrepreneurs and immigrant researchers. Other provisions expand funds for technology commercialization and regional innovation strategies.

Support Startup Businesses Act (S. 2419):  This bill amends the Small Business Innovation Research (SBIR) program to further encourage technology commercialization.  It allows SBIR grantees to use up to 5% of their funds to support commercialization efforts.

21st Century Competition Commission Act (H.R. 4686):  There is growing concern, especially among progressives, about growing industrial concentration and its impacts on consumers, communities, and small businesses.  This bill, recently introduced by Rep. Ellison (D-MN) and others, is a sign that Democrats are seeking to further raise the visibility of this issue.  It calls for an independent blue ribbon commission to study the impacts of economic concentration on today’s economy.

Small Business

Startup Accelerator Opportunity Act (S. 1969/H.R. 4071):  The SOAR Act proposes to increase federal funding for startup accelerator programs with a special focus on investments in distressed regions.

Veteran Entrepreneurs Act (H.R. 4473):  As more service members transition out of the military, we can expect to see many proposals focused on easing their shift back into the civilian economy.  HR 4473 is one example of this trend.  It provides tax credits to help veterans purchase franchise businesses.   Similarly, the Manufacturing Jobs for Veterans Act (H.R. 3963) creates new programs to help veterans obtain new jobs in manufacturing fields.

Small Business Advanced Cybersecurity Enhancements Act (H.R. 4668):  Cybersecurity protection for business, especially small business, is a growing concern.   Government contractors are now required to comply with new and stricter DoD cybersecurity rules that went into effect this year.  This new proposal seeks to help by creating cybersecurity assistance units at key agencies, such as the Department of Homeland Security, to help small firms deal with rapidly emerging cyber threats.

What’s New at EntreWorks Consulting?

2018 is gearing up to be another busy and productive year.  We’re kicking off new projects in Northwest Pennsylvania and in Wayne County, PA, and continuing with ongoing work for the Appalachian Regional Commission and the Pentagon’s Office of Economic Adjustment.   As usual, Erik Pages will be on the speaking circuit this Spring.  Look for him in Arlington VA, Billings MT, Harrisburg, PA, Seven Springs PA, and at the International Business Innovation Association (InBIA) annual conference in Dallas.

We’ve also added a new report to the EntreWorks Library.  Stronger Economies in Coal Reliant Places summarizes our work (on a project headed by the National Association of Counties and the National Association of Development Organizations) providing technical assistance to coal-reliant communities pursuing economic diversification strategies. 

We continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.   Recent posts have discussed worker retraining programs, technology talent in the Silicon Prairie, and the rise of “character towns.” You can also access blog updates at our Facebook and LinkedIn pages and on Google Plus. 

Time to Get Serious About Small Cities

Donald Trump’s election last year has triggered something of a boom in reporting on what’s happening in rural America.   For the first time in many years, reporters from major media outlets have dug deep into the economic challenges facing America’s rural regions.  That’s a great thing, but I would also like to see a similar focus on what’s happening in America’s smaller cities as they face challenges that may be even more profound that those facing rural America.  This issue of EntreWorks Insights takes a look at what’s happening in America’s smaller cities, and offers some suggestions for improving the lot of these communities. 

What are Small Cities? There is no single definition of what constitutes a small city.  For our purposes, I’m referring to small and medium-sized cities that typically have a population below 100,000 people and are often much smaller than that.   These communities may also be referred to as legacy cities, as they often were home to major employers or large manufacturing bases.    Many of these cities are located in the Rust Belt, and our list would include cities like Springfield MA, Flint MI, Scranton PA, and Racine WI.  But, our list could also include challenged smaller cities in other parts of the US, such as Stockton CA, Alexandria LA and Butte MT. 

These places are smaller, but share many characteristics with larger cities.  Their physical layouts are similar, as they typically have a downtown core with mixed residential areas, surrounding by rings of suburban and exurban development. 

The Legacy City Challenge

America’s major urban centers are booming—just try to find an affordable home or rental unit in places like New York, San Francisco, or Washington, DC.  Meanwhile, smaller legacy cities struggle to keep up.  These places have been hurting for awhile, but the gap between their performance and growing US regions widened during and after the Great Recession. Small legacy cities are often trapped in something of an economic “death spiral.”  As they lose economic anchors, such as local manufacturers and other jobs creators, revenue sources dry up and talented workers depart for better opportunities.  Many of the remaining residents are older and poorer.  Housing stock tends to be older, and its values depreciate at a faster than average rate.  Meanwhile, massive legacy costs in areas like pensions and infrastructure maintenance build up.  A declining and less wealthy population combines with higher city operating costs; this is a tough equation.  A recent Manhattan Institute study finds that per-capita debt burdens have grown in 71 of 96 surveyed Rust Belt cities.  A recent study from Pennsylvania found similar results, as nearly every small city had seen a growth in tax burdens accompanied by a major decline in the local tax base.

These difficulties are further worsened by the smaller size of these communities.  They lack the scale to act on their own, their markets are smaller, and they are often neglected by politicians from other regions.   They lack critical mass, and cannot make big investments that offer the prospect of changing the regional economic trajectory over the short or medium term.   Recovery and revitalization require a long-term and patient perspective.

How to Respond?

This toxic mix of economic decline and policy dysfunction creates massive challenges for economic development.  It is exceedingly difficult to attract or grow businesses in an environment where taxes are higher, the workforce may be less talented, and local amenities may be less attractive than those found in suburban areas or large cities.

While revitalization efforts can be challenging, they are not impossible.  And, many regions are succeeding.   For example, a recent Lincoln Institute for Land Policy study tracks the great successes found in a number of legacy cities such as Allentown and Bethlehem (PA), Grand Rapids (MI), and Albany (NY).  Reports like this one and my own extended experience working in small cities offer some pathways to progress.  Each community is developing its own unique strategies and approaches, but a number of focus areas appear to be especially promising.

Engage Philanthropy

Because they are “legacy” cities, many of these older small cities host community foundations and other philanthropic organizations.  This is a huge asset that many other regions envy.   We know that foundations have played a critical role in revitalizing places like Pittsburgh and Cleveland, but they’ve also played a central role in smaller cities like Grand Rapids MI and Chattanooga TN.  For example, Chattanooga has recently emerged as hotspot for entrepreneurship.   Much of the initial investments in these programs came from the local Lyndhurst and Benwood Foundations.   Tapping these philanthropic resources, or creating new ones, is essential for success.

Encourage Immigration

While the demographics story in rural America is one of steady population loss, the picture is more mixed for legacy cities.  Some places, like Flint and Youngstown, have seen major population declines.   Yet many smaller cities are growing, and these places tend to also be homes for relatively larger immigrant populations.   Examples include Allentown PA, Lowell, MA, Reading PA, Scranton PA, and Worcester MA.

This immigrant boom bodes well for these communities.  It brings a younger population, and the prospects for new businesses, new housing starts, and new industries.    To date, few legacy cities have fully embraced this immigrant wave as an economic development success story, but the potential is great.  Many cities in the Northeast, such as Allentown, Reading PA, and Paterson NJ are developing new programs to promote Latino entrepreneurship.   Recent research from Stanford suggests this is a smart good proposition as Latino business start-up rates have remained 2-3 times higher than the national average for decades. 

Connect, Connect, Connect

Because of their smaller scale and market size, most of these legacy cities can no longer go it alone, i.e. they must link their economies to other regions as opposed to serving as the core of a wider regional market.  Successful regions consciously strive to build these connections and to identify how their local companies and institutions are linked to major metro economies.   The Lincoln Institute study cited earlier found that many of the best performing legacy cities were located in the Northeast.  One factor behind this trend is location.  These higher performers are more closely tied to major East Coast metro areas in terms of business ties and cultural links.   They benefit from proximity to these metro areas, but can still tout their lower costs and other business benefits.   These are the primary factors driving many back office operations and distribution center facilities to locations in or near these smaller cities.  For example, as anyone who drives on Route 81 can tell you, eastern Pennsylvania is now a booming area for transportation and logistics operations.

Double Down on Manufacturing\

Most legacy cities are former manufacturing hubs, and most of them still have a higher than average concentrations of manufacturing businesses and jobs.  This is a good thing, and serves as a powerful competitive advantage.   Supporting manufacturers of all types makes sense, but many legacy cities will benefit from a special focus on small-scale manufacturing.  As a new Smart Growth America report shows, small scale manufacturers not only bring new jobs to a neighborhood, but they can also spur neighborhood revitalization.  Small-scale manufacturing operations, including popular trends like breweries and distilleries, are ideal tenants for older industrial buildings found in legacy cities.  

Stay Real

Targeting these small scale manufacturers helps on one final front: keeping it real.  Smaller legacy cities are called legacy cities for a reason:  they have deep and fascinating histories.   Preserving and honoring these legacies matters, and small cities should consciously avoid simply copying what works in LA, NY or Chicago.

Legacy cities can offer an authentic sense of place, and most experts suggest that this authenticity is in great demand by younger Americans.  When combined with lower costs of living and a friendly business climate, these factors can help position smaller cities for future prosperity.

We welcome your reaction to these thoughts and ideas and also welcome your own stories on what works to rebuild and revitalize America’s legacy cities. 

Resources

If you want to dig deeper on this topic, check out some of the following resources:

Federal Reserve Bank of Atlanta, Small Cities Economic Dynamism IndexFederal Reserve Bank of Chicago, Looking for Progress in America’s Smaller Legacy Cities(2017)Legacy Cities Partnership:  http://www.legacycities.org/Lincoln Institute for Land Policy, Revitalizing America’s Smaller Legacy Cities (2017)Manhattan Institute, “Rust Belt Cities and their Burden of Legacy Costs,” October 24, 2017.Pennsylvania Economy League, Communities in Crisis (2017).Smart Growth America, Made in Place: Small-scale Manufacturing and Neighborhood Revitalization (2017)

What’s New at EntreWorks Consulting?

As we head deep into the holiday season, we’re busy wrapping up a number of long-term projects for the Appalachian Regional Commission and the Pentagon’s Office of Economic Adjustment.  In addition, we continue to work with the National Association of Counties and the National Association of Development Organizations to provide technical assistance regions affected by the downturn in coal.  Our team met with Utah-based communities in October, and we’re now planning for technical assistance sessions in Montana and Wyoming.  Watch the EntreWorks Blog for more details.  Finally, we are also deep into program evaluation work with the Louisiana-based Rapides Foundation.

We continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.   Recent posts have discussed the state of rural manufacturing, the Start-Up Act of 2017, and new business data resources. You can also access blog updates at our Facebook and LinkedIn pages and on Google Plus.

Connecting Workforce & Business Development for Rural Entrepreneurs

If I had a trademark on the phrase “workforce development is economic development,” I’d likely be a wealthy person.  But, like many such phrases, this one is more style than substance.  Economic and workforce developers talk a good game about collaboration, but these partnerships are rarely strong, lasting, or effective.There are many good reasons for the “disconnect” between economic development workforce development.   I don’t want to review this debate here as there is lots of good research on this topic.   Instead, I want to offer one specific area for collaboration that is close to my heart and close to EntreWorks Consulting’s past and ongoing work in promoting entrepreneurial development in rural America. 

When it comes to supporting rural entrepreneurship, many regions suffer from a lack of capacity and a lack of resources.   They don’t have the money to invest in training and technical assistance for new business owners, and they even lack trained people to manage this kind of programming.  This is a gap that can and should be filled by the workforce development system, which has capacity and staff on the ground across rural America.   They also see a steady stream of people who likely have an interest in pursuing business ownership.    And, for most rural regions, economic prosperity or recovery is going to rely heavily on their ability to nurture new business growth.

At present, few rural entrepreneurship programs contain workforce development elements—despite the fact that most entrepreneurship advocates recognize talent development as a critical part of successful ecosystems.   Several factors are at work.  Small business owners typically lack the time or resources to access workforce development programs, and may under-invest in workforce training.  Meanwhile, few Workforce Investment Boards (WIBs) provide entrepreneur-friendly programs or support services.  A 2010 survey of WIBs found that only 5% targeted small business as a top priority, and few provided lower cost services targeted to small or new companies.

WIBs and other workforce organizations face resource constraints of their own, and may often opt for working with larger employers where larger scale outcomes are likely and where the return on investment is larger.  Recent changes in federal law are designed to encourage greater WIB focus on supporting local entrepreneurs, but these changes are too recent to allow for strong conclusions on their impact. 

Where Should Workforce Efforts Fit In?

While the connection between regional entrepreneurship and workforce development efforts are currently limited, the potential for closer linkages is significant.   Closer linkages can improve outcomes on traditional business and talent measures, such as business starts, new job creation, and improvements in the local talent base.   They can also generate broader community outcomes by enhancing economic inclusion and by supporting a more diverse and sustainable local economy.

These efforts could include the following:

Promoting Self-Employment:  Providing training for those with an interest in business start-upsSupporting Economic Diversification:  Providing training and specialized business services in sectors that are part of a wider economic diversification strategy.  In rural areas, this would include sectors like tourism, food systems, and alternative energy.Youth Engagement:  Entrepreneurship programs, like summer camps, can help keep kids in school and interested/committed to the local community.Business Services to New Firms:  Human resources management is one of the biggest challenges to company growth.  Workforce boards should provide HR services for small rural firms, not just for big employers. 

This is a very brief introduction to a complex set of issues—I welcome your reactions and feedback.  Yet, for me, this seems like something of a no-brainer.   For today’s rural economic developers, success depends on their ability to nurture local entrepreneurs and to build a strong local talent base.   At present, workforce development and entrepreneurship/small business programs operate on separate pathways, with few efforts to align program objectives and activities.   Both sides suffer from the status quo.   Rural ecosystems struggle to develop a strong pipeline of new entrepreneurs, and workforce development professionals miss out on opportunities to work with emerging local employers and to provide new learning opportunities for rural youth.

Closer alignment is possible without major new investments or massive shifts in policy directions.  Current rules and regulations permit most of the activities discussed in this essay.  What is needed is the will and the commitment to move forward.  By building closer collaborations between workforce and entrepreneurial development initiatives, rural regions can improve the quality of services provided to emerging rural ventures while also building a stronger entrepreneurial ecosystem for businesses of all types.

What’s New at EntreWorks Consulting?

It’s been a busy spring and summer seasons here at EntreWorks Consulting.  We continue to support long term research and evaluation projects for the Appalachian Regional Commission and the Pentagon’s Office of Economic Adjustment.  In addition, we continue to work with the National Association of Counties and the National Association of Development Organizations to provide technical assistance regions affected by the downturn in coal.  And, last but not least, we are kicking off several new projects including work in Central Louisiana and Northwest Pennsylvania. 

We have numerous upcoming training engagements, including teaching at the North Carolina Basic Economic Development Course in Chapel Hill (July 27) and the IEDC’s Small Business and Entrepreneurship Course in Omaha on August 24.  We’ll also be providing a webinar on “Benchmarking Innovation” for the Pennsylvania Economic Development Association on September 13.  Send us an email (info@entreworks.net) if you want to learn more.   Hope to see you on the road!

We have also added a new article, “Lessons from the Coal Industry Transition,” to the EntreWorks Library and we continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.   Recent posts have discussed the benefits of employee ownership, new data on the gig economy, and the growth of “little data” in economic development.  You can also access blog updates at our Facebook and LinkedIn pages and on Google Plus. 

What’s Next for Manufacturing Policy?

Donald Trump’s election campaign and first month in office have been predicated in part on his plans to “make America great again” via economic policies that support key US industries like manufacturing.    He has repeatedly contended that he and his team will bring manufacturing jobs back to America, and turn American industry into the envy of the world.   Of course, the devil is in the details, and this edition of EntreWorks Insights digs into these details, attempting the challenging task of assessing what’s likely to happen (and what should happen) with manufacturing policy in the coming years.

The Challenge

Before discussing policy options, we should look at the current state of play.  Manufacturing has had a tough couple of decades, but it’s hardly the “American carnage” claimed by President Trump.   

The decline in manufacturing jobs is a widely told story.  Since 2000, US manufacturing jobs have declined by 29%, even at a time where overall US employment grew by nearly ten percent.  As recent research from the Information Technology and Innovation Foundation (ITIF) notes, these depressing numbers hide an even more sobering reality.  Manufacturing output is also declining at a rapid pace.   Between 1999 and 2015, overall manufacturing output jumped 27percent.  But, if one fast growing sector—computer related manufacturing—is removed from the data, overall output improvement rates decline to roughly seven percent. 

The Opportunity

So, manufacturing jobs and output are stagnant, but there is some cause for optimism.  The US’s significant cost disadvantages have disappeared, and it is now cheaper to manufacture in the US than in many parts of China.   While this level playing field is good news, it would be preferable for US firms to compete on quality as opposed to low cost.  Moreover, other countries like Mexico will still enjoy cost advantages when compared to US manufacturing.

Better news comes from the fact that US manufacturers are poised to benefit from what researchers are calling Industry 4.0 or the Next Production Revolution.  These terms refer to the combination of manufacturing and new digital technologies, such as robotics, sensors, artificial intelligence, and cloud computing.  The Internet of Things is simply the first iteration of this ongoing industrial transformation.   McKinsey Global Institute research suggests that this revolution in automation could boost global productivity rates by as much as 1.4 percent per year. 

American manufacturers are investing big time in these new capabilities, and are expected to double their investment levels (up to $350 billion) in the next few years.  And, the face of manufacturing is already being transformed.  According to a recent PwC survey, 59% of surveyed US manufacturers already deploy robotics technology and about 2/3 are already using 3D printing tools for prototyping, production, and other purposes. 

Policy Issues and Directions

The rise of Industry 4.0 is very good news, but there’s no guarantee that the US can capture this opportunity or effectively support workers who may be displaced in this economic transition.  That’s where policy comes in.  Using the Presidential bully pulpit to “save jobs,” as in the recent Carrier deal, is not necessarily a bad thing.  But, it does not constitute an effective and impactful manufacturing strategy.  To fully capture this opportunity, and to build a sustainable US manufacturing base, some new policy directions will be needed.   Read on for my take on what should happen!

Developing Talent

While the media has focused on manufacturing job loss, worker shortages are the reality for many manufacturers.  And, this labor shortage is likely to persist into the future, even as automation hits the factory floor.  Talent development has long been a priority concern for large manufacturers and groups like the National Association of Manufacturers.   But, it is now a pressing concern for smaller firms as well.  A recent survey of small manufacturers from the Manufacturing Extension Partnership (NIST-MEP) program finds that nearly 47% of firms identify employee recruitment as a top challenge.  In 2009, only 19% cited this challenge.

US manufacturers and policy makers will need to prepare for an extended period of worker shortages.   From the policy side, we need to think about how to build stronger talent pipelines to get workers prepared for Industry 4.0 jobs.    From the industry side, managers will need to rethink how they hire, train, and deploy workers.    Workers who combine digital and engineering capabilities will be in especially high demand.

New workers cannot be the only focus for talent development.  Reskilling and upskilling current manufacturing workers and managers will also be required.   In fact, surveyed manufacturers now report that the lack of digital culture and training is the Number 1 challenge impeding adoption of Industry 4.0 technologies and practices.

Sparking Innovation

Succeeding in Industry 4.0 will depend on the ability of US manufacturers to remain at the leading edge of innovation.    This will not occur in industry alone; it will depend on a robust role for government as well.    Leading manufacturing nations, such as China, Germany, and Japan, all rely on extensive public support.   Continued and expanded public innovation investments are needed here as well. 

These investments can take multiple forms, but two programs are especially important.  The Manufacturing USA program is just gaining traction, and started to show important results in building stronger ecosystems for advanced manufacturing.  Similarly, the NIST-MEP program, which provides technical assistance to smaller manufacturers, should be continued and expanded.  

Nurturing Manufacturing Entrepreneurs 

A dynamic US manufacturing sector should also be a place that is welcoming and supportive of start-up and scale-up entrepreneurial ventures.  We need more manufacturing start-ups, and we need to do a better job of supporting them.  

Few manufacturing analysts comment on the small manufacturing revolution that is already underway across the US in the form of breweries, distilleries, food production, and other “makers.”  These folks are artisans, but they are manufacturers as well.   Small scale manufacturers are starting to transform many urban areas, and we need to do more to support them.  Local entrepreneurship efforts can help, but we also need to encourage the development of specialized real estate like maker spaces, shared kitchens, and the like.

Programs like the NIST-MEP can also help, and there’s good news on this front.   In a late 2016 surprise move, Congress passed a new version of the COMPETES Act which changes current cost sharing rules related to NIST-MEP consulting services.  This shift will make it easier for new and small firms to get sophisticated consulting services that will help them retool, grow, and capture new markets. 

Having more entrepreneurs—in manufacturing and elsewhere—is a good thing its own right.  But, it can also help rebuild the industrial commons, i.e., the “R&D and manufacturing infrastructure, know-how, process-development skills, and engineering capabilities” that are essential to modern manufacturing.  New firms can help introduce new process, product, and service innovations and help bring new manufacturing opportunities back home.

Addressing Global Imbalances

US manufacturers face many global headwinds. President Trump and others point to trade pacts like NAFTA as key factors in US job loss.   Yet, these trade impacts are likely dwarfed by the effects of a strong dollar which has appreciated more than 25% since 2013.  While the strong dollar makes imports cheaper, it creates big challenges for US exporters.   Many analysts predict that the continued strong dollar will have a pronounced negative effect on manufacturing employment.   

Some researchers advocate direct action to realign the dollar’s value vis-à-vis currencies in China and other major US trading partners.   While this prospect may be unlikely, we do need to recognize that the strong dollar is a more important factor than trade deals in terms of reducing US exports.

Promoting Smart and Just Transitions

Most of the issues highlighted in this essay are forward-looking, i.e. they assess how to build a stronger US manufacturing future.  However, we must not forget the past.   The rise of Industry 4.0 will not be smooth and seamless.  Many workers and communities will face displacement as automation and new ways of working change the face of US manufacturing.    Smarter policies to support and retrain displaced workers must be part of any effective manufacturing policy program.

Sadly, the US presently does an awful job on this front.  The US has a unique and unenviable position:  our workforce faces some of the highest levels of economic dislocation, yet we provide some of the worst services and support in terms of helping workers respond, retrain, and recover.  A few figures tell the depressing story.  Over the past two decades, about 3.2% of American workers are displaced every year (i.e. they lose jobs due to outside economic factors as opposed to poor performance).  And, of this group, only half are re-employed within one year.   (Note that these figures cover all workers in all industries; they also undercount displacement levels in downturns like the Great Recession.  The displacement figures are higher for older workers and in industries like manufacturing, and conversely, the reemployment numbers are worse.)  

The US needs to completely rethink how it supports displaced manufacturing workers.  At a minimum, we likely need to spend more on these activities.   Currently, the average OECD country spends twice as much as the US in labor market and retraining programs.   But, we also need to do things differently.   New policies should include:  better early warning systems to be aware of potential job loss or firm closings, new employment approaches like job sharing and job rotations that can help reduce full-time job loss, and robust investments in training, apprenticeships, and job-to-job transition assistance.   These types of programs are the right and just thing to do, but they can also help address the talent development challenges noted earlier in this essay.

What’s New at EntreWorks Consulting?

Life at EntreWorks HQ remains busy and rewarding.  We are in the midst of two major long-term efforts:  1) A research project (on behalf of the Appalachian Regional Commission) assessing the development of entrepreneurial ecosystems in Appalachia and, 2) Providing continued support to the Office of Economic Adjustment’s Defense Industry Adjustment program.   We are also supporting engagements with the Administrative Office of the US Courts, the University of Pittsburgh, the National Association of Counties, and the University of Texas-Arlington.

We also have numerous upcoming speaking engagements, including a panel at the March 2017 annual meeting of the National Association of Workforce Boards and at upcoming National Association of Counties and National Association of Development Organizations’ events in the DC region.  We also continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.   Recent posts have discussed America’s poor track record on worker retraining, new thinking on clusters, and rural wealth creation. You can also access blog updates at our Facebook and LinkedIn pages and on Google Plus.