Newsletter – Entreworks Insights

EntreWorks Insights is a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development. It is sent via email and provides a deeper look into new thinking about how to prosper in the 21st century economy. Previous editions can be accessed below. To subscribe, please click here.

 

Current Newsletter:

  • Volume 17, Number 3-December 2020

    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!

    December 1, 2020

Previous Editions:

  • Volume 17, Number 3-December 2020

    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!

    December 1, 2020
  • Volume 17, Number 2 – June 2020

    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. 

    June 1, 2020
  • Volume 17, Number 1 – April 2020

    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.

    April 2, 2020
  • Volume 16, Number 3 – December 2019

    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. 

    December 8, 2019
  • Volume 16, Number 2 – July 2019

    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. 

    July 8, 2019
  • Volume 16, Number 1 – February 2019

    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. 

    February 8, 2019
  • Volume 15, Number 3 – November 2018

    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. 

    November 8, 2018
  • Volume 15, Number 2 – June 2018

    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

    June 8, 2018
  • Volume 15, Number 1 – March 2018

    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. 

    March 8, 2018
  • Volume 14, Number 3 – November 2017

    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.

    November 8, 2017
  • Volume 14, Number 2 – July 2017

    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. 

    July 8, 2017
  • Volume 14, Number 1 – February 2017

    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. 

    February 8, 2017

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