Blog - The ED Advisor

August 25, 2020August 25, 2020

U.S. Kitchen Incubators: An Appetite for Food-Based Entrepreneurship

Economic development organizations seeking to create a more dynamic, entrepreneurial, and inclusive economy would be wise to pay attention to the U.S. kitchen incubator industry.

U.S. kitchen incubators — sometimes characterized as commercially-licensed kitchens, shared-use kitchens, commissary kitchens, kitchen accelerators, or ghost kitchens — are a unique type of culinary micro-enterprise. The terms are used interchangeably, but there are important distinctions between them. The primary distinguishing feature is the degree to which supportive services are provided to wholesale, retail, and catering food entrepreneurs. Shared-use kitchens offer minimal or no support; incubators provide expertise to new and early-stage startups; whereas accelerators look to scale up operations and achieve significant growth for established, investible startups (American Communities Trust, Econsult Solutions, Urbane Development, 2016).

These culinary production facilities are not to be confused with community kitchens, which serve neighborhood stakeholders and institutions, such as St. Mary’s Food Bank Community Kitchen and Local First Arizona Community Kitchen in Phoenix.

Industry surveys indicate that the number of U.S. kitchen incubators grew from no less than 135 in 2013 to more than 200 in 2016, expanding to 600+ across the 48 contiguous states and District of Columbia in 2019 (Econsult Solutions, Urbane Development, The Food Corridor, Catharine Street Consulting, 2020). They operate in urban (52 percent), suburban (27 percent), and rural (21 percent) areas, but are heavily concentrated near large cities (Econsult Solutions et al., 2020). Their popularity stems from the “locavore movement” that connects food producers and consumers within the same geographic region, the creation of food-based makerspace that focuses on handmade products, and a growing recognition that entrepreneurship provides an opportunistic pathway to economic success (The Food Corridor, 2020).

Culinary Entrepreneurship

The relationship between U.S. kitchen incubators, culinary entrepreneurs — chefs, caterers, farmers market and festival vendors, food truck proprietors, bakers, and specialty food producers — and the broader concept of small business entrepreneurship, is powerful.

National Trends

Let’s take a look at the broader picture.

According to the Kauffman Foundation, the rate of new entrepreneurs — or the number of non-business owners that start a new enterprise each month — has fluctuated between 0.27 and 0.34 percent of the adult population during the past two and a half decades. Expressed differently, roughly 300 out of 100,000 adults create a new business.

The rate of new entrepreneurs is highest among Latinos, who have consistently outpaced other races and ethnicities over time. New entrepreneurs who are Asian and White compete closely for second and third position. Comparatively, the rate is slightly lower among African-Americans (see chart below).

Richard Mulligan | The ED Advisor
Source: *Kauffman Indicators of Entrepreneurship, Ewing Marion Kauffman Foundation*, 2020

Overall, the rate of minority entrepreneurs has increased; while the rate of entrepreneurship among immigrants is significantly higher than for the native-born (see chart below).

This is important because the gap in wealth between immigrants and native-born citizens decreases considerably through business ownership.

Those with the least education have proven themselves to be more prolific when it comes to entrepreneurship in comparison to other groups with higher education attainment levels (see chart below).

Put together, early-stage entrepreneurship is fertile ground for a wide range of ethnic and racial groups looking to grow a business. This is particularly true for U.S. kitchen incubators, where on average, 52 percent of tenants are women and 30 percent are minorities. The diversity of food entrepreneurs is even more prominent in larger metropolitan areas like New York City, San Francisco, Seattle, and Chicago (Econsult Solutions, Urbane Development, The Food Corridor, Catharine Street Consulting, 2020).

U.S. kitchen incubators provide food entrepreneurs with a low-risk opportunity to access their own food production equipment and preparation space — a challenge for startups that is otherwise cost prohibitive. At the same time, entrepreneurs receive training, mentoring, and the opportunity to collaborate with a large network of food companies, while working to refine their business model.

From a “big picture” perspective, kitchen incubators serve as a catalyst for inclusive and equitable economic development.

Business Models

Similar to their tenants, kitchen incubators operate under a diverse set of business models, operating as stand-alone facilities or accessories to markets, community centers, and housing projects, or cloud kitchens. Facility goals are just as diverse, striving to fulfill owner-operated, corporate, non-profit, government, and university-sponsored missions. They can be self-funded, or receive financial support in the form of grants, debt-financing, corporate sponsorship, or investor seed funding. Some are run by culinary entrepreneurs who started their own business and decided to capitalize on the opportunity to lease space and supplement their cash flow. Other facilities are more intentional about supporting entrepreneurs, while providing a living income for their founders. Hence, there is no “standard” kitchen model that can be applied to a region’s culinary ecosystem (Colpaart, 2018).

A key point to remember is that kitchen incubators — like their food business tenants — are startup businesses that need to perform their own due diligence in terms of market research, business model development, financial planning, and marketing. In this regard, it is critically important to customize operations to serve their local communities.

Food Innovation Districts

On a state and regional level, U.S. kitchen incubators are taking root in food innovation districts. A food innovation district is defined as “a geographic concentration of food-oriented businesses, services and community activities that local governments support through planning and economic development initiatives in order to promote a positive business environment, spur regional food system development and increase access to local food,” according to Patty Cantrell of Regional Food Systems Solutions, LLC.

Michigan is a national leader in the establishment of food innovation districts — an outgrowth of the Michigan Good Food Charter, a statewide policy platform that envisions sourcing 20 percent of Michigan’s from Michigan food markets and production, providing 80 percent of the population with access to locally-grown, healthy foods. Several districts have already taken hold in the Eastside Neighborhood, Lansing; Eastern Market, Detroit; Grand Traverse Regional Market, Traverse City; Marquette Food Co-op and Hub, and; Grand Rapids Downtown Market, Grand Rapids.

Food Innovation Districts: An Economic Gardening Tool is designed to help other government and community leaders seize opportunities with local and regional food. Outlined is the process and tools used to create districts, which can be applied elsewhere in the nation. The districts are being put to practical use by fostering regional food hubs, kitchen incubators, farm-to-table retail and restaurants, farmers markets, food festivals, nutrition and cooking education, healthy food assistance, urban agriculture production, and community kitchens.

Culinary Incubator and The Kitchen Door have compiled lists of more than 1,000 kitchens from around the country. Select examples of incubator facilities identified in their respective databases for Greater Phoenix are shown below*:

Chef’s Shared Kitchen	Mesa, AZ
Commissary and Catering Kitchen	Tempe, AZ
Freedom Kitchen	Scottsdale, AZ
NT Kitchen	Phoenix, AZ
Phoenix Commercial Kitchen	Phoenix, AZ

Source: CulinaryIncubators.com

National best practices for kitchen incubators include*:

Commonwealth Kitchen	Boston, MA
Hot Bread Kitchen	Tempe, AZ
Pacific Gateway Center Culinary Business Incubator	Phoenix, AZ

Source: American Communities Trust, 2016

Phoenix 2025 Food Action Plan

As part of the City of Phoenix General Plan, residents approved a Healthy Food System goal to promote the growth of a healthy, affordable, secure and sustainable food system that makes healthy food available to all Phoenix residents (2015). The 2050 Environmental Sustainability Goals include a Local Food System Goal to maintain a healthy, sustainable, equitable, and thriving local food system (2016).

Incorporated in the Action Plan is a strategy to create a food business rental incubator in the South Central Avenue Corridor, possibly as a food hall. Links to The Shared Kitchen Toolkit: A Practical Guide to Planning, Launching, and Managing a Shared-Use Commercial Kitchen, the Minnesota Institute for Sustainable Agriculture’s Commercial Kitchen Guide, and CulinaryIncubator.com interactive mapping tool are listed as resources under the “Commercial Kitchen” category.

Other resources are identified for community gardens, farm-to-school, farmers markets, food co-ops, food hubs, food waste, healthy living, and urban agriculture.

Included in the Appendix is the South Phoenix Food Action Plan, which taps into the U.S. Environmental Protection Agency’s (EPA) Local Foods, Local Places Program, with management and technical assistance from the U.S. Department of Agriculture, Center for Disease Control and Protection (CDC), and Delta Regional Authority (DRA).

Meanwhile, a development proposal to create a “food innovation center” has surfaced in West Phoenix. Proponents hope to convert an old Kmart building into a center that serves nontraditional food businesses (e.g., food trucks, catering firms, and food delivery businesses). A career training center is also envisioned for the 112,000-square-foot building. Maricopa Community Colleges is conducting a feasibility study for Phoenix’ Community and Economic Development Department.

All of this points to the growing and evolving nature of kitchen incubators, their ability to provide food entrepreneurs with an education in running a business, and a means to provide food industry jobs and education opportunities for those looking to climb the economic ladder.

Editor’s Note: *These are not meant to be all-inclusive lists, but rather a partial sample of kitchen incubator facilities.

July 4, 2020January 14, 2021

Minimum Wage, Minimum Growth

Photo by Zhanjiang Chen on Unsplash

Raising the minimum wage leads to slower job and wage growth for younger, low-wage workers

Before the outbreak of the coronavirus pandemic, a host of cities, counties, and states moved to raise the minimum wage. Proponents argued that a higher minimum wage was needed to provide workers with enough income to afford a living wage — the amount required to maintain a normal standard of living. They viewed an increase in the minimum wage as an economic stimulus of sorts, placing more disposable income in the hands of low-income earners. Their hope is that a wage increase would help to lower employee turnover and reduce training costs. Critics claim that a higher minimum wage results in lower employment and reduced hours for existing employees. They believe an increased minimum wage creates a powerful incentive for large employers to automate jobs (witness the kiosks at McDonald’s), while driving companies with low profit margins out of business. Furthermore, they point to a lack of evidence that minimum wages are effective at reducing overall poverty rates or poverty rates among workers.

Amidst this debate, the W. E. Upjohn Institute for Employment Research, a private, not-for-profit, non-partisan, independent research organization that has studied policy-related issues of employment and unemployment since 1945, states that recent working papers indicate “the pass-through effect of minimum wage increases on prices is smaller than previously thought; small raises in the minimum wage lead to slower wage growth for low-wage workers; and that the minimum wage reduces job growth over a period of several years with the effects being strongest for younger workers and for those in industries with a higher proportion of low-wage workers.”

Local and State Minimum Wage Ordinances

Most initiatives to raise the minimum wage are at the local and state level.

Leading the charge is Seattle at $16 per hour for large employers and $15 per hour for small companies. Seattle is joined by Montgomery County, Maryland; New York City; and Washington, D. C., which have established a minimum wage of $15 per hour (effective January 1, 2020). The University of California-Berkeley Labor Center’s Inventory of U.S. City and County Minimum Wage Ordinances reveals that local governments with minimum wage ordinances are highly concentrated in eight blue states — California (36), New Mexico (5), Illinois (2), Maine (2), Maryland (2), Minnesota (2), Colorado (1), Washington (1) — and the District of Columbia.

The Economic Policy Institute Minimum Wage Tracker indicates that 27 states and the District of Columbia have changed their minimum wage law since 2014 (along with their current minimum wage and sub-minimum tipped wage: Alaska ($10.19/$10.19), Arizona ($12.00/$9.00), Arkansas ($10.00/$2.63), California ($13.00/$13.00), Colorado ($12.00/$8.98), Connecticut ($11.00/$6.38), Delaware ($9.25/$2.23), Hawaii ($10.10/$10.10), Illinois ($10.00/$6.00), Maine ($12.00/$6.00), Maryland ($11.00/$3.63), Massachusetts ($12.75/$4.95), Michigan ($9.65/$3.67), Minnesota ($10.00/$10.00), Missouri ($9.45/$4.73), Nebraska ($9.00/$2.13), Nevada ($9.00/$9.00), New Jersey ($11.00/$3.13), New Mexico ($9.00/$2.35), New York ($11.80/$7.85), Oregon ($12.00/$12.00), Rhode Island ($10.50/$3.89), South Dakota ($9.30/$4.65), Vermont ($10.96/$5.48), Washington ($13.50/$13.50), Washington, D. C. ($15.00/$5.00), and West Virginia ($8.75/$2.63).

Seven states have no minimum wage law or have in place a minimum wage below the federal minimum wage of $7.25 per hour — Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee, and Wyoming. The federal minimum wage applies in all of these states.

Cost of living plays an important role in creating industry and region differentials in minimum wage rates. For example, Oregon’s minimum wage law establishes a separate minimum wage rate for the Portland Urban Growth Boundary area and designated non-urban counties. New York law establishes separate minimum wage rates for New York City, suburban counties, and the rest of the state. Simultaneously, New York’s minimum wage law allows for variations by industry. The fast-food industry started at $10.50 in New York City and $9.75 for the rest of the state, both gradually rising to $15 per hour over a period of several years.

Another common feature is indexing for inflation, which calls for making annual adjustments in the minimum wage based on changes in the Consumer Price Index (states are measured against the national average, which is set at 100). This occurs in eighteen different states and the District of Columbia.

Richard Mulligan | The ED Advisor
Source: World Population Review, 2020

This hodge-podge of higher minimum wages is a reflection of several factors, not least of which are cost of living and political philosophy. It is no coincidence that the highest minimum wages are most often found in jurisdictions with the highest costs for housing, food, healthcare, and other expenses (see chart above). Nor is it a coincidence that the most expensive jurisdictions to live in are Democratic strongholds.

National Minimum Wage

Several groups advocate for raising the national minimum wage to $15 per hour — Campaign for America’s Future, Economic Policy Institute, FairShare, Interfaith Worker Justice, Let Justice Roll Living Wage Campaign, National Employment Law Project, Partnership for Working Families, Reclaim the American Dream, Restaurant Opportunities Centers United, and United for a Fair Economy. These proponents are primarily concerned about providing a living wage for workers, reducing poverty, and wage inequality.

Opposing their efforts are major business organizations such as the National Association of Manufacturers, National Federation of Independent Business, National Restaurant Association, National Retail Federation, and U.S. Chamber of Commerce. They argue that a national minimum wage of $15 per hour leads to increased labor costs and tough choices, causing employers to reduce jobs, reduce hours, or reduce benefits.

Lost in our political discourse are the implications of a one-size-fits all approach that creates unintended consequences for the U.S. and its tapestry of economically diverse states. It’s one thing to implement a $15 minimum wage for low-wage workers in Hawaii, which has a cost of living index of 192.9; another thing entirely to implement a $15 minimum wage in Mississippi, where the cost of living index is 86.1* The impact on lower cost of living states, their industries, and their employees, is broader and far more disruptive.

Weighing in on the discussion is the Congressional Budget Office, which estimates that raising the minimum wage to $15 from its current $7.25 could cost 1.3 million jobs, while increasing wages for 17 million workers.

Despite the state and region differentials in minimum wage, and the prospect of permanent job loss, the Democratic-controlled U.S. House of Representatives passed H. R. 582 – Raise the Wage Act to boost the national minimum wage to $15 per hour in a recorded vote of 231-199. The bill also eliminates the separate minimum wage requirements for disabled, tipped and newly-hired employees (under 20 years of age), bringing them into line with regular employees over a 7-year period. Political observers believe the Senate is unlikely to take up the bill, and President Trump has indicated he’s prepared to veto the legislation.

Minimum wage increases generate mixed outcomes. A higher minimum wage increases worker purchasing power and stimulates consumer demand. On the flip side, a higher minimum wage discourages employers from hiring low-skill, low-wage workers, which leads to slower wage growth — particularly for younger workers — and creates an incentive to replace human labor with automation technology. To a large extent, the gains and losses attributed to a higher minimum wage offset one another.

Perhaps minimum wage federalism offers a better answer.

Why Federalism Matters opens with this statement:

“What do we want from federalism?” asked the late Martin Diamond in a famous essay written thirty years ago. His answer was that federalism — a political system that permits a large measure of regional self-rule — presumably gives the rulers and the ruled a “school of their citizenship,” “a preserver of their liberties,” and “a vehicle for flexible response to their problems. These features, broadly construed, are said to reduce conflict between diverse communities, even as a federated polity affords inter-jurisdictional competition that encourages innovations and constrains the overall growth of government” (The Brookings Institution, 2005).

Democrats and other proponents of a higher national minimum wage of $15 per hour are pushing for a level of forced uniformity that ignores the dramatic effects that a “cookie-cutter” minimum wage policy has on employers and workers in different states across the country. As such, state governments and municipalities should be given the flexibility to continue experimenting with their own minimum wage policies. This allows other jurisdictions to learn from their successes and failures.

As an added benefit, decentralizing the minimum wage issue enables the federal government to focus on more important fiscal obligations. For example, COVID-19 has pushed the 2020 National Deficit to $2.74 trillion through June. Second-tier financial issues, like the minimum wage, should be delegated to lower levels of government.

If reducing poverty is the desired policy outcome, there is compelling evidence that the Earned Income Tax Credit (EITC) is a far more effective tool:

“Each one percent in a state supplement to the federal EITC reduces poverty rates by one percent. (It also provides an incentive to seek employment, since the credit can only be claimed on earned income)” (Economic Policies Institute, 2020).

Wouldn’t it be nice if the U.S. Congress chose to get the federal government’s fiscal house in order before attempting to dictate to the people about minimum wage policy? Wouldn’t it be nice if the U.S. Congress worked smarter, and not just harder?

*Editor’s Note: A worker earning $15 per hour in Honolulu, Hawaii is equivalent to earning $6 per hour in Hattiesburg, Mississippi, once allowances are made for the difference in cost of living.

June 23, 2020June 28, 2020

Accelerating with COVID-19

Photo by Daria Nepriakhina on Unsplash

Startup accelerators are going virtual in response to the coronavirus pandemic

The Ewing Marion Kauffman Foundation (2020) offers a clear and succinct definition: “Accelerators are entrepreneurship support programs primarily aimed at helping participating startups scale-up and access early customers.” They are cohort-based, fixed-term programs — typically 3 to 12 months — that offer intensive mentoring, training, networking, and workspace for early-stage, growth-driven companies. Their intent is to increase the growth rate of a company by condensing two years of business building into a few months’ time. A common feature is assistance with investment fundraising in exchange for an equity position.

Being organizationally diverse, accelerators can be publicly or privately funded, focus on different types of entrepreneurs, industries, and business activities, and look for unique applicant characteristics in their selection process, which is highly competitive. Others are corporate accelerators that are sponsored by large companies (e.g., Barclays, Disney, Microsoft, Sprint). Being chosen to be part of an accelerator translates into real-time recognition, which is valuable to entrepreneurs. Graduation often takes the form of a “demo day” event, with startup owners delivering their pitch deck to an audience of angel investors, venture capitalists, media representatives, and other stakeholders.

Startup accelerators are invaluable resources for entrepreneurs, but the COVID-19 plot twist is causing them to rethink their operations and create new virtual programs.

A Brief History

Accelerators came on the scene in the mid-2000s. Some of the earliest and better-known accelerators include Y Combinator (2005), Techstars (2006), Seedcamp (2007), Tech Wildcatters (2009), Startupbootcamp (2010), and SOSV’s six programs — Chinaccelerator (2010), HAX Accelerator (2011), MOX (2012), Indiebio (2014), Rebelbio (2014),^[1] and Food-X (2014).

The startup accelerator concept evolved and spread rapidly in the U.S., then Europe, and throughout the globe. In 2016, the Gust Global Accelerator Report informed readers that $206,740,005 had been invested worldwide in 11,305 startups by 579 accelerator programs in 68 countries. Varying widely in their design features, the popularity of accelerators has been fueled by technological advances, the rapid rise of entrepreneurship, and value propositions that attract a number of stakeholders in the startup ecosystem.

Included in the 2018 Seed Accelerator Rankings are pioneers like Y Combinator and Techstars, along with newer startup accelerators such as AngelPad, The Alchemist Accelerator, Amplify LA, Chicago New Venture Challenge, MuckerLab, StartX, and others.

Accelerator Impact

Research indicates the jury is still out in terms of measuring the overall impact of accelerators. It is not clear whether startup firms attract more investment than they would if they had not participated in an accelerator program (Cohen, Feder, Hochberg, & Murray, 2019). There is stronger evidence that startups participating in accelerators have an increased likelihood of being acquired, quitting, or receiving follow-on venture capital financing (Smith & Hannigan, 2015). Accelerator startups have also been found to achieve better long-term outcomes in terms of funding, web traffic and employee growth, in comparison to similar “almost-accepted” program applicants (Hallen, Cohen & Bingham, 2019).

What appears to be particularly valuable to startup owners are the close relationships developed between themselves and other program peers. This typically means spending time on-site with other like-minded professionals. But the advent of COVID-19 and related stay-at-home orders has made these trying times anything but typical. To adjust, startup accelerators are pivoting to recovery strategies, remote meetings with mentors, and posting virtual pitches online.

COVID-19 Response

Outlined below are several examples of how startup accelerators have evolved in response to the COVID-19 crisis.

CDL Recovery: Rapid Response Innovation Program

The Creative Destruction Lab (CDL), operating five sites in Canada, one in the U.S., and two in Europe, has launched a global program — the CDL Recovery Program. CDL Recovery focuses on information-based solutions to accelerate the world’s recovery from the COVID-19 pandemic. Examples include, but are not limited to: (1) swab-based tests that predict whether the coronavirus is present in an individual; (2) contact tracing; (3) image analysis of people density or proximity; (4) symptom monitoring; and (5) workplace monitoring of air or sewage.

Applicant competition is open to startups, corporations, informal collaborations, social inventors, social impact ventures, and not-for-profit initiatives. There are no fees for participation and CDL does not take an equity position.

IgnitedX COVID-19 Response Accelerator

Kansas City’s newest startup is IgnitedX COVID-19 Response Accelerator, the brainchild of Black & Veatch and LaunchKC. The virtual accelerator will commit a minimum of $250,000 in grants or in-kind services to startups dealing with testing and screening technologies, disease-tracking software, and emergency medical facilities to assist with relief efforts during the COVID-19 pandemic. It will also explore other solutions to COVID-19 problems, such as remote collaboration software and tools, biotech-related services, supply chain solutions, and modular communications (like providing Wi-Fi kiosks in underserved communities).

IgniteX COVID-19 Response Accelerator builds upon the Black & Veatch Cleantech Accelerator, which selected seven startups for its program last year. The B&V Cleantech Accelerator focuses on tech solutions for the engineering industry and is part of the LaunchKC umbrella of programs.

Microsoft Global Social Entrepreneurship Program

In response to the COVID-19 crisis, applications are being accepted for the Microsoft Global Social Entrepreneurship Program. Available in 140 countries, the program provides a mix of technical and business support with grant funding to help startup entrepreneurs advance innovative solutions in healthcare, sustainability, and accessibility. Qualified startups receive access to free Microsoft cloud technologies and up to $120,000 in Azure credits. A dedicated program manager helps startups market and sell their solutions, as well as to potential customers, including leading enterprises and nongovernmental organizations.

Plug and Play COVID-19 Accelerator

Plug and Play has launched a global COVID-19 Accelerator that is dedicated to scaling the world’s most promising startups that can help address the coronavirus pandemic. According to their website, the program focuses on existing technologies that can achieve massive scale across six tracks: healthcare, enterprise, retail, finance, travel, and supply chain.

Plug and Play acknowledges that the coronavirus has disrupted global supply chains and business models, which in turn has transformed the nature of work and placed unprecedented pressure on health systems and public institutions. As a catalyst for adaptation and innovation, the COVID-19 Accelerator will connect leading corporations, governments, non-profit organizations, and investors with Plug and Play’s ecosystem of 20,000 startups, with technologies ranging from computer vision and diagnostics, cybertech and collaboration tools, blockchain and automation — with the intent to flatten the curve and build the capabilities necessary to thrive in the new normal.

Qualcomm Small Business Accelerator Program

Qualcomm has unveiled the Qualcomm® Small Business Accelerator Program, which is designed to help small businesses transition to a mobile-first work environment using its connected technologies. The comprehensive program will provide support for small businesses across various industries, so they can continue to maintain operations throughout the current global pandemic and beyond.

The Qualcomm Small Business Accelerator Program, Qualcomm Technologies and its ecosystem partners — Best Buy Business™ (technical support), Citrix® (digital workspace solutions, Lenovo™ (5G-enabled PCs), Linksys® (Wi-Fi networking devices), Samsung (PCs and mobile devices), Sophos (security software solutions), and Targus® (mobile docking stations) — will select 25 small businesses to receive products and technical support valued at up to $25,000. Customized to the needs of the selected businesses, the program will infuse a variety of devices powered by various computer and connectivity solutions from Qualcomm Technologies, such as Always-Connected PCs (cellular-connected laptops), Wi-Fi systems, mobile phones, Bluetooth enabled headsets and active mobile hotspots, and technical support from other key partners. With more businesses depending on cloud-based solutions, these connected products offer enhanced productivity and security for small businesses.

UTSA COVID-19 Business Recovery Accelerator

The University of Texas at San Antonio (UTSA) Institute for Economic Development launched the Small Business Development Center COVID-19 Business Recovery Accelerator (COBRA) to help small businesses weather the financial hardships caused by the coronavirus pandemic. COBRA is billed as the only recovery accelerator of its kind in Texas to help stabilize and rebuild the small business economy.

COBRA will serve as a single “front door” to help small businesses in Bexar County and 10 surrounding counties with access relief, recovery, rebooting, and resilience resources. The Business Recovery Accelerator will help participating businesses navigate federal funding opportunities, provide confidential, no-cost consulting in finance, human resources, operations, marketing, and business and strategic planning with the goal of winning back and finding new customers.

To make South Texas’ economy more resilient, COBRA will also help small businesses scale up their operations and become more competitive through importing and exporting, contracting, market research, technology commercialization and emergency preparedness.

COVID-19 is changing the way we live and how businesses operate. For those who work in the digital world — startup accelerators are decidedly tech-centric — innovative efforts are underway to help ease the pain. Thanks to technology, accelerator founders and startup entrepreneurs are able to advance, while maintaining access to funding, networking, and potential investors.

Editor’s Note: ^[1] Rebelbio has since merged with SOSV’s Indiebio brand in New York City.

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June 14, 2020June 27, 2020

The Growing Divide Between the Haves and Have-Nots

The Growing Divide Between the Housing Haves and Have-Nots

Photo by Brian Babb on Unsplash

Affordable Housing is a Critical Part of Economic Development

Most economic developers occupy a privileged position in the community. They get to rub shoulders with academic administrators, corporate executives, government officials, media representatives, and other influencers. They might serve on the board of directors for a local charitable organization, or take a leadership role in philanthropic fundraising for arts and cultural programs. What doesn’t always get their attention are current trends in income and economic inequality, the growing divide between the “haves” and “have-nots,” and what they can do about it.

A case in point is affordable housing.

Lara Fitts, President and CEO of the Greater Richmond Partnership, writes:

“A few months ago, I was talking with a fellow economic development professional who asked me, why I cared about affordable housing because in his words, ‘affordable housing isn’t economic development.’ In his view, economic development is meant to help companies facilitate job creation, enhance the community’s tax base, and provide opportunities for increasing household incomes. However, what happens when a community is so successful in its economic development efforts that the supply of housing decreases and prices escalate so quickly that jobs and income growth don’t keep up?”

The truth of the matter is that affordable housing is a critical part of economic development.

Quality of Life

To ensure they’re able to attract skilled workers, companies are increasingly interested in localized quality of life factors in the site selection process. In Area Development’s “34th Annual Survey of Corporate Executives and 16th Annual Consultants Survey,” quality of life ranked 4th, behind only highway accessibility, availability of skilled labor, and labor costs and ahead of 24 other site location factors like state and local incentives and accessibility to a major airport. Baked into the quality of life recipe is a key ingredient — an employee’s ability to secure adequate housing.

Phoenix-Mesa-Scottsdale MSA
Homeownership Market — Richard Mulligan | The ED Advisor *Source: Area Development, 34th Annual Survey of Corporate Executives and 16th Annual Consultants Survey*

Affordable Workforce Housing

Consider for a moment how housing affects a business’s competitiveness strategy — indeed, a region’s competitiveness — in terms of attracting and retaining talent. When employees can’t afford to live near their place of work, employers have to spend more money on relocation expenses, wages, and face higher turnover rates. Where employees choose to live is also impacted by the work situation of their spouse, partner or significant other; commute times (the average is 25-35 minutes); neighborhood characteristics; schools; and safety.

Now ask yourself, when you’re considering a job offer, how long does it take before you start to factor in salary, housing options, and commute time? Then, for the sake of argument, imagine that you have accepted a position on the same pay scale as an “essential worker” — police officer, firefighter, nurse (LPN), or public school teacher. Your income falls within 60 to 120 percent of area median income. Mortgage lenders impose a limit of 28 to 30 percent of household income for principle, interest, taxes, and insurance (PITI). Given these parameters, what are your housing options?

The homeownership market appears to be out of reach — aside of being able to tap into a second income or some other type of financial assistance. This assumes prospective homeowners are looking to buy a medium-priced home in the Phoenix-Mesa-Scottsdale MSA, which has an affordability index of 6 (on a scale of 1 to 10; 1 is the most affordable, 10 is the least affordable), per Kiplinger (2020).

Phoenix-Mesa-Scottsdale MSA
Rental Market — Richard Mulligan | The ED Advisor *Source: The National Housing Conference (2020)*

This leads a prospective employee to the rental market, where a 1- or 2-bedroom apartment or other residential rental property becomes financially palpable. Even under these more favorable conditions, the 3-bedroom option is too expensive.

The State of the Nation’s Housing

The Joint Center of Housing Studies of Harvard University’s report, “The State of the Nation’s Housing 2019,” provides an overview of pre-coronavirus pandemic housing trends. Their researchers found that despite household growth returning to a more normal pace during the past decade, housing construction wasn’t able to maintain the same rate of progress, keeping pressure on home prices and rents and eroding affordability.

Factors contributing to the continued shortfall in housing supply include relatively weak household growth since the Great Recession, with the national vacancy rate for both owner-occupied and rental units falling to 4.4 percent, its lowest point since 1994. Influencing the slow construction recovery is a wariness on the part of builders and lenders, who haven’t forgotten how difficult it was to work through the housing boom of the early 2000s, which created an excess supply of homes. Labor shortages, complicated by an economy nearing full employment, and the rising costs of land and materials made it unprofitable for developers to build for the middle market. Instead, home builders chose to build in the higher end of the housing market, where they’re able to cover their expenses. Regulatory restrictions on higher-density development and not-in-my-backyard (NIMBY) opposition made it even more challenging to provide affordable housing products.

In terms of housing income and affordability, cost burdens have continued to move up the income scale. National Association of Home Builders (NAHB) economists have calculated that more than half of U.S. households — 63 million to be precise — are unable to afford a $250,000 home. In a similar vein, the Federal Reserve Bank of St. Louis determined that national house price indices have outpaced increases in per capita income and inflation since 2012.

One of those indices is the NAHB/Wells Fargo Housing Opportunity Index, which measures the share of homes that would have been affordable to a family earning the average median income, based on standard mortgage underwriting criteria. The index utilizes two major components — income and housing cost — and reveals how housing costs have worsened in recent years.

City of Dallas

The City of Dallas (pop. 1,343,573) — our nation’s ninth-largest municipality — has Housing and Neighborhood Revitalization, the Office of Economic Development, and Planning and Urban Design organized under the direction of Michael A. Mendoza, Chief of Economic Development and Neighborhood Services. This underscores the interdependence that exists between community development, economic development, and planning.

Dallas’ Housing Policy Toolkit consists of the following:

Market Value Analysis

The Market Value Analysis (MVA) is a data-driven tool that helps residents and policymakers analyze the local real estate market at a census block level. It is built on local administrative data and validated by local experts. This analysis was prepared by The Reinvestment Fund. Public officials and private actors utilize the MVA to more precisely target intervention strategies in weak markets and support sustainable growth in stronger markets.

Nine market types are identified on a color-coded spectrum of residential strength or weakness, along with the number of Census Block Groups in each market type. Included are multiple tabs for key indicators — median sales price, sales price variance, percent owner occupied, percent vacant homes, percent new construction units, percent rehabilitation units, percent foreclosure filings, and percent code violations.

The MVA also provides tabs to other geographic data for mapping purposes — reinvestment areas, bond projects, City land, tax increment finance (TIF) districts, public improvement districts (PIDs), New Markets Tax Credits, Opportunity Zones, Community Development Block Grant (CDBG) eligible areas, R/ECAP areas, DISD and RISD elementary schools, and DISD and RISD middle schools.

Comprehensive Housing Policy

Dallas’ Comprehensive Housing Policy is guided by the Market Value Analysis and identifies a housing shortage of approximately 20,000 units. Six out of ten families are housing cost-burdened (spend more than 30 percent of income on housing), making it difficult to build asset wealth and break multi-generational cycles of poverty.

Three overarching goals drive the policy: (1) Create and maintain affordable housing units throughout Dallas; (2) Promote greater fair housing choices; and 3) Overcome patterns of segregation and concentrations of poverty through incentives and requirements. Various housing and financial assistance programs, ranging from creation of a Housing Trust Fund to the adoption of an ordinance amendment that allows homeowners to build and rent Accessory Dwelling Units (ADUs) are contemplated in the housing policy.

Strategic Economic Development Plan

Complementing Dallas’ Housing Policy Toolkit is the Draft Strategic Economic Development Plan (2019). During the stakeholder engagement phase, respondents to an online residential survey identified affordable housing as a leading issue (ranked #3 behind quality of public schools and City infrastructure). The market assessment phase determined that Dallas has the second largest share of homeowners whose monthly owner costs are 30 percent or greater than household income, when compared to Chicago, Atlanta, Denver, Phoenix, Austin, Houston, San Antonio, and Fort Worth.

The Strategic Action Plan phase outlines four overarching goals, one of which is “Opportunity for All: An Equitable and Inclusive Economy.” Under this goal, interested parties will find “Strategy #1: Revitalize South Dallas/Southern Dallas,” that devotes a significant amount of attention to “Affordable Housing.” This is a best-practice example of how affordable housing policies are harmonized with Dallas’ economic development initiatives.

The link between affordable housing and economic development is stronger than many practitioners might realize. Too often, the creation and implementation of a diversified housing program is viewed as something that has or should be relegated to a separate community development or human services department. As a result, limited thought is given to the impact of affordable housing on local economic development. However, the relatively high ranking of quality of life in site selection, the prominence of affordable housing in quality of life assessments, and the high priority that citizens place on having a safe and decent place to live should give economic developers pause for thought.

Economic developers have the privilege of attending high-profile groundbreaking ceremonies for assisted corporate locates and other business projects. Those on the guestlist often read like a “Who’s Who” list of C-level executives, elected officials, and other dignitaries; people who reside in the top five percent income stratum. Behind the scenes are the assembly line laborers, call center operators, construction journeymen, distribution warehouse specialists, public sector “essential workers,” and retail associates who reap much smaller financial rewards. We owe it to them to make sure they share in the community’s economic growth.

Making affordable housing a reality, especially in locations that are close to work, maximizes their ability to build wealth.

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June 6, 2020June 27, 2020

The Age-Old Problem

Photo: Getty Images

Age discrimination needs to be a bigger part of the workforce conversation

Amidst a strong economy — before “social distancing” became part of the American lexicon — employers painted a picture of having to scramble to lure applicants. Nearly 7 in 10 employers reported talent shortages, the worst level ever and a jump of 23 percent from the previous year. That’s more than three times higher than a decade ago.

Richard Mulligan | The ED Advisor *Source: ManpowerGroup, 2020*

While employers struggled to fill positions, ProPublica and the Urban Institute were busy analyzing research data from the Health and Retirement Study (HRS), a premier source of multidisciplinary data that researchers use to address important questions about the challenges and opportunities of aging. They discovered that employers are hesitant to hire or retain older workers, potentially limiting their ability to stick around and retire on their own terms. Those unfortunate enough to be laid off have trouble finding a new job and experience long-term unemployment (ProPublica, 2020).

Between the time older workers enter the study and leave paid employment, 56 percent are displaced before they choose to retire. Only 1 in 10 of these workers ever recovers financially, earning much less than they did before their careers were disrupted. Years afterward, they’re still making up for ground lost and find themselves with fewer job prospects (ProPublica, 2020).

Richard Mulligan | The ED Advisor Source: ProPublica and the Urban Institute

An estimated 28 percent of stable, longtime employees sustain at least one damaging layoff by their employers between turning 50 and leaving work for retirement (ProPublica, 2020).

An additional 13 percent of workers who start their 50s in long-standing positions unexpectedly retire under circumstances that suggest they were encouraged to leave. They begin by telling survey takers they plan to keep working for many years, but, within a couple of years, they suddenly announce they’ve retired, amid a substantial drop in earnings and income (ProPublica, 2020).

So where’s the disconnect?

Age Discrimination

A primary culprit is the age-old problem of discrimination.

According to a 2018 American Association of Retired Persons (AARP) survey, 61 percent of older workers said they had either faced or seen age bias in the workplace; and 38 percent believe the practice is “very common.” A similar 2019 survey sponsored by Hiscox, a global specialist insurer, and conducted by Wakefield Research, found that 80 percent of older workers said their career trajectory had been impacted by their age, and 43 percent had left a company because they had experienced or witnessed age discrimination.

Feeding discriminatory hiring practices is the myth that older workers are somehow “washed up” professionally. Youth-obsessed hiring managers carry negative stereotypes about older workers, who are incorrectly viewed as being set in their ways, are less digitally savvy, are too highly compensated to retain, are complacent or unmotivated, and are difficult to manage.

To make matters worse, hundreds of the nation’s leading employers — Amazon, Cox Communications, Goldman Sachs, T-Mobile, and Facebook, to name a few — were found to have placed recruitment ads that excluded older age groups. They also shut out more experienced job applicants on Linkedin and other social recruting platforms. Such disclosures set off a wave of legal proceedings.

According to several civil rights groups — the American Civil Liberties Union, National Fair Housing Alliance, and Communications Workers of America, among others — some corporate recruitment ads were limited to “digital natives,” “recent college graduates,” or “people younger than 38.” Such hiring tactics are unfair, immoral, and illegal.

As part of a legal settlement with the plaintiffs, Facebook announced it would no longer allow businesses to buy targeted ads that potentially discriminate on the basis of race, gender, or age group. Anyone advertising home sales, employment opportunities, or credit offers — three areas where federal law prohibits discrimination in ads — no longer have the option of explicitly aiming ads at people on the basis of those characteristics. This policy change also applies to advertising on Instagram and Messenger, which are Facebook subsidiaries.

Despite this progress, age discrimination is an accepted bias that continues to pervade the hiring process in many organizations.

America’s Aging Demographics

Ironically, the discussion about age discrimination comes at a time when America’s population is growing older.

By 2060, the elderly share of the U.S. population (65 and older), which was 15.2 percent as recently as 2016, is expected to climb to 23.4 percent — an increase of 8.2 percent. Small percentage declines are predicted for the remaining cohorts: -2.1 percent (ages 45-64); -3.1 percent (ages 18-44); and -3.0 percent (under 18).

Compared to the younger population, the 65-plus crowd is the fastest growing segment of the American workforce.

Richard Mulligan | The ED Advisor Source: U.S. Census Bureau, 2020

Many people believe there is a strong correlation between America’s aging population and the Baby Boomer generation. That’s understandable, but inaccurate. Falling fertility rates and increases in life expectancy are the driving forces behind these demographic trends. This would have occurred even if the Baby Boom had never taken place. Baby Boomers have influenced the timing of America’s aging — at first, dampening its effect, but on the back end, accelerating it (Concord Coalition and Global Aging Institute, 2020).

Protecting Older Workers Against Discrimination Act (POWADA)

In January, the U.S. House of Representatives voted 261-155 in favor of H.R. 1230, the Protecting Older Workers Against Discrimination Act (POWADA). Sponsored by Representatives Bobby Scott (D-VA) and Jim Sensenbrenner (R-WI), the legislation would restore protections lost in a 2009 U.S. Supreme Court decision that required age to be the sole reason an employer fired or changed a worker’s job in order for the worker to win an age discrimination case.

The legislative process now shifts to the U.S. Senate, where bipartisan companion legislation (S. 485) is sponsored by Senators Chuck Grassley (R-IA) and Bob Casey (D-PA).

Our nation’s premier 50+ organizations — American Association of Retired Persons (AARP) and Association of Mature American Citizens (AMAC) — have thrown their support behind this legislation.

Unfortunately, age discrimination in the workplace is still disturbingly pervasive. Too many companies don’t seem to understand and appreciate the value of older employees. The positive qualities attributed to them — experience, perspective, adaptability, responsibility, commitment — can be tapped in many different ways. Measures such as the POWADA legislation are a step in the right direction toward eliminating discrimination and providing better access to quality jobs for older workers.

Countless workers in their 50s, 60s, 70s and beyond are actively engaged in their careers and enjoy working. Some are impacted by financial pressures caused by the COVID-19 lockdowns or Great Recession; some are caregivers for parents who live longer; others find meaning and self-fulfillment, or work to maintain their emotional well-being.

At 93, Tony Bennett, America’s iconic singer of traditional pop, big band, show tunes, and jazz music, has eleven concerts remaining on his 2020 tour. Franklin Graham, age 67, leads religious crusades and provides political commentary, all the while serving as CEO of the Billy Graham Evangelistic Association and Samaritan’s Purse, an international Christian relief organization. At 85, David McCullough, one of our country’s most beloved historians, known for his Pulitzer Prize-winning biographies of Harry Truman and John Adams, published his 13th book, “The Pioneers: The Heroic Story of the Settlers Who Brought the American Ideal West.” Nancy Pelosi, the 60th and 63rd Speaker of the U.S. House of Representatives, is 80 years old. Next year, the White House is slated to be occupied by one of two candidates who are working well beyond the age that most people start collecting Social Security. The incumbent, President Donald Trump, is nearly 74 years old. His challenger, former Vice President Joe Biden, will turn 78 less than three weeks after the 2020 Presidential Election.

Like many of today’s older workers, these prominent citizens are skilled, proficient, and have a strong work ethic. This leads to a priceless gift — the joy of work.

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June 1, 2020June 27, 2020

Business Retention and Expansion

Photo by 123RF

Economist Joseph Schumpeter (1883-1950) is best known for his economic theories on business cycles, capitalism, and for introducing the concept of entrepreneurship. In Capitalism, Socialism, and Democracy (1942), Schumpeter coins the term “creative destruction,” which describes the “process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” The term easily applies to economic development organizations (EDOs) and their approach to business retention and expansion.

Where Are Jobs Being Created?

Economic development leaders understand the importance of new and existing businesses. They are keenly interested in existing companies, which create 75 percent of new private-sector jobs. They are also attentive to the 25 percent of new private-sector jobs that come from the churn of new startups minus business closures (U.S. Bureau of Labor Statistics, 2020).

Employment From Establishment Dynamics, 2010-2018 — Richard Mulligan | The ED Advisor Employment From Establishment Dynamics, 2010-20218

Click on graphic to enlarge

EDO concerns about existing businesses and employment are reflected in the implementation of business retention and expansion programs. Business Retention & Expansion International, in partnership with Eric Canada, CEO, Blane, Canada, Ltd., offer the following definition for such activities:

“In economic development, business retention and expansion is a program designed to strengthen the connection between companies and the community while encouraging each business to continue to grow in the community. Through direct interactions, events, and research, the program seeks to gain insight into business practices, planned future actions, as well as the challenge of targeted companies. Then, to turn this ‘business intelligence’ into value added services, programs, and/or products that address individual and shared company opportunities and problems” (2018).

Properly executed, business retention and expansion programs cultivate a strong business climate and create satisfied CEOs that become effective cheerleaders and tireless goodwill ambassadors for the community. At the same time, business prospects evaluate the community’s economic suitability and receptivity for business through conversations with these same CEOs.

The business retention and expansion toolbox includes business surveys, business walks, industry roundtables and focus groups, and other activities. The level of community engagement adopted by EDOs is a reflection of their social, economic, and cultural environment.

Business Surveys

One technique for soliciting feedback about a community’s business climate is the implementation of business surveys. This requires EDOs to build a database of existing businesses and determine the types of businesses that will be approached (e.g., high-wage firms, firms in select geographic areas, or firms in targeted industry clusters). Hard copies of the surveys are mailed to local businesses and recipients are given two options to provide feedback — online through a SurveyMonkey link or completion of a printed copy of the survey. The information collected protects the confidentiality of respondents and the survey results are reported in the aggregate, helping EDOs to better serve the needs of existing employers.

Business Visitations

Complementing business surveys are volunteer- and economic developer-led business visitations. Visits are focused on interviews with C-level executives to learn how the community might help their company. The interview solicits information about the firm’s plans for expansion or relocation, which is helpful in identifying growth opportunities and at-risk companies. Follow-up is critical and can take the form of a letter or phone call that responds to issues raised during the interview.

Capturing and analyzing the data obtained from business surveys and visitations is an important component of business retention and expansion programs. A variety of software packages are available to help manage survey data and provide insights into local businesses and their economic potential, including:

Bludot

Bludot offers modern, cloud-based software that allows users to view and manage all businesses in the community with one platform. A relatively new product on the market, Bludot is now live at 14 cities located in California, Florida, and Maryland. Bludot recently offered 3 months free usage of their software for any cities that want to support and engage with their businesses during the COVID-19 pandemic. The firm has received funding from the Alchemist Accelerator and GovTech Fund, is a startup partner with City Innovate, and a member of Stanford StartX.

ExecutivePulse

ExecutivePulse is promoted as a Customer Relationship Management (CRM) solution for economic developers, public-sector agencies, and community stakeholders. The product can be used for business recruitment, foreign-direct investment, business retention and expansion, entrepreneurial development, workforce development, and related initiatives. Recent case studies listed on the firm’s website include the Province of Albert, Canada; Birmingham Business Alliance; British Columbia Economic Development Association; Fresno County Economic Development Corporation; Philadelphia Works; Cornerstone Alliance (Southwest Michigan); Province of Ontario, Canada; Commonwealth of Pennsylvania; and San Bernardino County, California.

Gazelle.ai

Gazelle.ai is an “AI-Powered Business Intelligence Growth Platform” designed to identify fast-growth companies for business development. Extremely useful for business attraction and recruitment, the platform also has the ability to identify growth companies in the EDOs own backyard. Client resources include articles, infographics, press releases, podcasts, and webinars.

Synchronist Suite

Developed almost 20 years ago, Synchronist Suite is the granddaddy of crowdsourced economic development software. The platform revolves around business interviews, interview validation, objective analysis, predictive analysis, and key performance indicators. Synchronist provides insight into customer relationship management; each company’s value, growth potential, level of risk, and satisfaction; quality of a market’s retail, education, health care, arts/culture, and other local services; talent development; project tracking; research; and training. The “Synchronist User’s Forum” is held annually to network, share best practices, conduct how-to sessions, and discuss ongoing research projects.

Business Walks

Business walks provide a day dedicated to learning more about local businesses through face-to-face interviews on the business’ turf. They allow teams of community leaders to canvass multiple businesses in one day, covering more ground than traditional business visitations. The teams utilize short, streamlined surveys of predetermined questions to identify issues and bring resources to bear on those issues, and to diagnose firms on the brink of expansion or those at risk. Successful business walks are held in communities throughout the United States and Canada.

Regardless of technique, business retention and expansion programs work best when integrated into the EDOs economic development strategy, business attraction and recruitment, and entrepreneurial development initiatives.

Industry Roundtables and Focus Groups

Anatalio Ubalde, CEO, SizeUp and GIS Planning Inc., has written a thought-provoking article that identifies 10 business retention and expansion innovation trends. He considers industry roundtables and focus groups a superior method of collaborative problem solving. He makes the argument that “the business survey should die,” and outlines their shortcomings when it comes to dealing with the “acting as fast as business” expectations of modern companies. In his opinion, business surveys are not agile enough to anticipate fundamental marketplace shifts.

“The business survey should die.”

Anatalio Ubalde, CEO, SizeUp and GIS Planning Inc.

Business walks help to expand the retention and expansion footprint, but require that EDOs follow up quickly to address the issues raised by businesses. If EDOs are incapable of responding quickly, Anatalio believes they are better off not proceeding with a business walk.

Deliver Direct Value

Ubalde finds there is an inherent conflict between EDO job creation metrics, businesses that are focused on increasing productivity and reducing labor costs with technology, and workforce development. Going forward, the focus of business retention and expansion needs to change. If EDO and local business meetings are to be successful, economic developers have to deliver direct value to local businesses. Delivering direct value means viewing business relationships as a two-way street. Instead of gathering business intelligence and responding in-kind, Ubalde contends that EDOs should use Internet-delivered technology to proactively deliver assistance to a broader constituency of local businesses. This takes the form of data and information that helps them better understand company performance, find customers, and improve operations.

A market-driven economy is going to produce a certain amount of “churn” or “creative destruction” over time. In fact, strong economies are characterized by high rates of churn and high rates of economic growth. The challenge for economic development professionals is determining how to help businesses survive and grow in the midst of inevitable change, while mining business intelligence data.

Editor’s Note: “Beyond the Survey: How EDOs Add Value Through Business Retention and Expansion” explains how EDOs are moving from basic survey and visitation models to more comprehensive, value-added models. The paper outlines the various ways EDOs are serving businesses, measuring their activities, and promoting them in the community.

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May 25, 2020June 27, 2020

The Unsung Progress of Women

Photo by Jungwoo Hong on Unsplash

The title on her Facebook page reads: “Sara Fried Fitness.” A static banner at the top of the page displays this header: “Sharing My Life * Monthly Online Fitness Groups * Ongoing Personal New Coach Mentorship.” Below is the tagline: “WIFE. Physical therapist turned SAHM to two boys. Fashion lover.” Website visitors are invited to text with questions about fitness, nutrition, or personal development. In a recent post, she laments the impact of a car accident that left her with a herniated disc. She refers to physical therapy as “a career I love…& I mean LOVE,” noting that “Coaching has given me choices. And while I’m going to stay in physical therapy as long as I can, it’s nice to know I have options.” Sara’s social media platform is a living testimony to the unsung progress of women.

Education Gender Gap

She also happens to be my daughter.

Sara is a graduate of Northern Arizona University (NAU), where she earned a Bachelor of Science in Exercise Science. She, along with other female students of the millennial generation (and beyond), make up a majority of full- and part-time students attending U.S. colleges and universities. It’s been this way for quite some time. One has to take a step back in time — 1978 to be precise — to find enrollment records where male students outnumber their female counterparts in postsecondary education. The gender gap has widened considerably in the last four decades.

Richard Mulligan | The ED Advisor Source: National Center for Education Statistics

Click on graphic to enlarge

Education and Earnings

The strong correlation between education, income, and wealth is common knowledge. What is not well known is the extent to which women have leveraged their education to increase their paychecks. Reports show that increases in earnings have favored women over men for decades.

Richard Mulligan | The ED Advisor Source: U.S. Bureau of Labor Statistics, Current Population Survey

Click on graphic to enlarge

On the lower end of the education attainment spectrum, both men and women have experienced declines in weekly earnings. However, the decrease for women was much smaller than for men — a drop of 5 percent for women, compared to a decline of 26 percent for men.

Men with moderate education attainment levels have experienced a decline in weekly earnings of 18 and 11 percent, respectively. At the same time, women with equivalent levels of education increased their earnings by 3 and 5 percent.

Earnings for women with a bachelor’s degree or higher increased 34 percent, while earnings for men rose by 19 percent.

Herein lies the primary evidence for the unsung progress of women.

There is No Gender Wage Gap

“Equal Pay Day” was originated by the National Committee on Pay Equity (NCPE) in 1996. The symbolic day serves as a public relations event to illustrate the pretense of a gender pay gap.

Democratic leaders — President Barack Obama, Hillary Clinton, and others — have mimicked the NCPE’s contention that “In 2018, the median salaries for all full-time, year-round workers showed women earning 81.6 cents for every dollar men earned.” Outlets as politically diverse as HuffPost, Prager University and The Washington Post have explained this statistic and why it is misleading.

The gender gap statistic cites only the average difference between men and women, across all jobs, making no mention of occupation, position, education, number of hours worked, time taken off, or most significantly, the impact of personal life choices. A study by the American Association of University Women (AAUW), a well-known feminist organization, looked at male and female college graduates one year after graduation, and found that when you control for the differences in choice between men and women, the wage gap narrowed to only 6.6 percent.

Choice is the operative word.

Far fewer women choose to work in construction, production, transportation, and material moving occupations, preferring to enter career fields that pay less than those chosen by men. On the other hand, more women choose to occupy a higher percentage of professional and related occupations than men.

Click on graphic to enlarge

Impacting women’s decision-making processes is their personal preference for jobs with lower pay but greater benefits (time off to raise children), less physical risk, and more stable work hours.

Those asserting that the gender gap is a product of discrimination against women have invested in faulty logic. Using the same reasoning, young men are being discriminated against by young women. After all, twenty-something females have earnings that exceed men’s income by 10 percent or more, at least in certain disciplines. It must also be true that white men are being discriminated against by Asian-American men, who outearn their caucasian brethren by over 5 percent. Silly, right? Such flawed thinking is ridiculous at face value, which drives home the point.

Epilogue

If you compare men and women who hold the same job, with similar backgrounds and qualifications, the wage gap is virtually nonexistent. This runs counter to our political discourse, much of which is firmly entrenched in 1970s-era feminism. Claims that women are being paid less, and this is key — for doing the same work as men — doesn’t hold up to tighter scrutiny. Fact checkers have consistently rated such claims as “mostly false.” Unfortunately, that hasn’t stopped politicians and well-intentioned advocates from portraying women as chronic and perpetual victims of discrimination.

This does a disservice to the millions of women who, like my daughter, earned a college degree, pursued their passion, built a career, and made tremendous economic strides. They are making personal career and life choices — often in collaboration with their husband, partner, or significant other — to achieve positive outcomes for themselves, their families, and the communities where they live.

Let’s celebrate the unsung progress of women.

Editor’s Note: A report from the U.S. Census Bureau, “The Changing Economics and Demographics of Young Adulthood: 1975 – 2016,” reveals that young women are pulling ahead of many young men in the workforce. At the same time, young men are falling to the bottom of the income ladder, a trend we will explore in a future blog post.

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May 19, 2020June 27, 2020

EDOs Digital Response: COVID-19

Photo by Brian McGowan on Unsplash

Economic development organizations (EDOs) are pivoting to digital technologies as the centerpiece of their disaster response to the COVID-19 crisis. The coronavirus pandemic has had a devastating impact on small businesses and workers. EDO’s are making a concerted effort to make real-time data publicly available, and help businesses navigate the complexity of COVID-19 relief and recovery efforts.

Business Resources

The most prominent digital response is the creation of EDO website pages that provide accurate and timely information on COVID-19 resources. Typically displayed are links to CARES Act funding, application assistance, and other financial resources. EDOs are pushing to get federal dollars in the hands of local businesses impacted by official stay-at-home orders, and the employees that work for them.

EDO COVID-19 resource pages are also designed to help businesses reopen (personal protective equipment, social distancing), stay open, operate safely, and build community support. The pages serve as a crisis information hub — a collection of finance, buy local campaign, charitable donation, testimonial, online education offering, and public health dashboards.

COVID-19 GIS Mapping Tool

Last month, GIS Planning released a free, interactive GIS data tool to map the spread and impact of COVID-19 for U.S. economic developers. The data tool is a customized version of the company’s Mapping Intelligence Component, displaying national and county-level data for the coronavirus alongside Chmura’s Economic Vulnerability Index. EDOs and chambers of commerce across the U.S. are invited to post the free tool on their websites. This allows them to get interactive, mobile-responsive data to their regional stakeholders. The COVID-19 data comes from The New York Times and is updated daily.

Restore Your Economy

RestoreYourEconomy provides up-to-date information on COVID-19 and its economic impacts. The website is managed by the International Economic Development Council (IEDC) with support from the U.S. Economic Development Administration (EDA) and IEDC’s Economic Development Research Partners program.

The website offers a host of digital material on COVID-19 topics: IEDC research, reopening the economy (by industry), financial programs, insights and guidance from economic development professionals, business and worker assistance, member surveys, crisis communication management, and webinars. EDOs also have access to COVID-19 survey and website templates that can be customized.

RestoreYourEconomy is an excellent source for sharing best practice information with public and private stakeholders who are looking to rebuild their economy.

SizeUp

SizeUp is a Fintech Internet service company dedicated to providing powerful business intelligence. They are taking a lead role in working with EDOs to better serve local small businesses and entrepreneurs with their digital software products.

During the months of March and April, SizeUp completely waived the setup fees to have their SizeUp Local Business Intelligence (LBI) product added to EDO websites. This allows local businesses to access SizeUp LBI for free directly from the EDO website.

EDOs taking advantage of this opportunity include the Greater Sacramento Economic Council, Maricopa, Town of Gilbert, and Arizona Public Service. Local businesses utilizing the SizeUp LBI product are able to benchmark performance, identify customers and suppliers, and find the best places to invest their advertising budget.

SizeUp also makes articles and white papers available for download. This includes Coronavirus Economic Development Case Studies and National Survey Results, a report that provides case study examples of how economic developers and policy makers are taking action in response to the COVID-19 crisis. Each initiative is intended to mitigate the devastating economic impacts of state lockdowns and stay-at-home orders on workers, families, and businesses. Featured sections in the document focus on transition work, online local business and entrepreneur assistance, engaging commercial property owners, corporate site selection, social distancing bingo, fashion and sports repurpose manufacturing, utility companies creating their own stimulus, swapping companies temporarily, the business of food, and tech industry partnership.

Business Attraction and Site Selection

Site Selection After COVID-19: Predictions From the Experts, a recent survey conducted by the Site Selectors Guild, an association of the world’s foremost professional site location consultants, in partnership with Development Counsellors International (DCI), provides insights on how COVID-19 impacts corporate location strategy.

Survey findings indicate that 52 percent of companies interviewed are pausing site selection projects, and 45 percent are moving forward with projects. Those surveyed also predict there will be a shift in global manufacturing and supply chain strategy, an uptick in on-shoring to North America, an increase in remote work that will shrink the demand for office real estate, and forsees the emergence of life sciences, logistics, and advanced manufacturing as “hot” industry clusters. Survey respondents encouraged EDOs to prioritize helping displaced workers find employment, closely followed by talent/workforce attraction initiatives. EDOs were also advised to keep up the communication with companies and site selection consultants.

ZoomProspector

Due to COVID-19 causing massive disruptions — cancelled executours, postponed familiarization tours, government travel restrictions, investors pausing to reconsider their strategic footprint — site selection consultants have been unable to undertake personal site visits to local communities. Until the pandemic subsides, EDOs are facilitating virtual site selection by showcasing properties with GIS Planning’s ZoomProspector. This digital tool gives site selection consultants the ability to access information on commercial and industrial sites, directly on EDO websites. Consultants are able to research and analyze properties and communities, collecting data on demographics, workforce, GIS, business/industry, education, and wages from the comfort of their office. Personal site visits will eventually resume, but prior to those occurring, EDOs capable of using technology to stay connected will have a competitive advantage.

Zoom

Because of COVID-19 social distancing requirements, EDOs are utilizing Zoom digital conferencing software to meet and work together. Zoom conferencing software helps people maintain human connections, irrespective of geographic location. EDOs are finding value in cost-effective, modern communications that cover video, audio, web, and chat, and easily scales to their needs.

Editor’s Note: To avoid “Zoombombing,” users need to be careful about sharing meeting links publicly. Instead of posting a meeting link to a Facebook group or in a promotional tweet, distribute information via a more private method, such as email. Meetings should be set to “private.” Be careful not to use your personal meeting ID. In its place, use a one-time meeting ID to make the meeting more secure.

COVID-19 has become an economic and health crisis like no other. The world is entering uncharted territory, but as the old saying goes, “Thinking will not overcome fear but action will” (Stone, 1962)

High performance economic development organizations are finding leadership opportunities in COVID-19. They are aligning expectations. They are focusing on strengths, successes, opportunities, and collaboration. They are providing accurate, real-time information. They are staying positive, and above all else, they are communicating, communicating, communicating.

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May 17, 2020June 27, 2020

Social Entrepreneurship for Persons with Disabilities

Photo by Ian Schneider on Unsplash

Social entrepreneurship is on the rise.

Conventional wisdom tells us there is a big distinction between for-profit businesses and non-profit organizations. Businesses are laser-like focused on their market-driven business model; nonprofits strive to fulfill a charitable mission that advances the public interest. As the old saying goes, “never the twain shall meet.”

This traditional way of thinking is giving way to the notion that businesses can pursue profits and address key social and environmental issues. Likewise, nonprofits can stay on mission and generate a profitable revenue stream. Both concepts are essential components of an alternate business model — the social enterprise.

Properly executed, social enterprises are uniquely positioned as change agents for addressing a particular social problem. Social entrepreneurship is spreading across a wide range of industries and pursuing altruistic goals — not the least of which is giving persons with disabilities a lift up.

Motivating Factors

What is the motivation for pursuing social entrepreneurship and the desire to operate social enterprises for persons with disabilities?

A primary consideration is the economic divide that exists between persons with and without disabilities. The 2019 Annual Report on People with Disabilities in America, published by the Institute on Disability/UCED, University of New Hampshire, outlines the scope of their social and economic status:

Population

There are 42.6 million people with disabilities, who comprise 13.1 percent of the U.S. population. Disabilities refers to difficulties related to vision, hearing, cognition, ambulation, self-care, and independent living. The percentage of the population with disabilities has trended upward during the past decade, increasing from 12.7 percent in 2008 to 13.1 percent in 2018.

Education

Approximately 16.7 percent of persons with disabilities have not attained a high school diploma, compared to 7.7 percent of their peers without disabilities, reflecting a 9.0 percentage gap.

With regard to the gap between people with and without disabilities at the postsecondary level, 15.6 percent of persons with disabilities attained a bachelor’s degree or higher, compared to 38.4 percent of those without disabilities. This reflects a college-or-more gap of 22.8 percent.

Employment

About 37.5 percent of people with disabilities are employed on a full-time basis. In contrast, the employment percentage was more than double for people without disabilities at 77.8 percent. The employment gap is 40.3 percent.

Earnings From Work

The median earnings of full-time/full-year workers with disabilities was $40,454, compared to $46,250 of workers without disabilities, resulting in an earnings gap of $5,796.

Poverty

Earnings from work and personal income are indicators of a person’s financial condition. At the same time, poverty is measured at the family level. An individual is considered to be living in poverty if they live in a family with income below the poverty line — a figure that varies depending on the makeup of their family. In 2018, the poverty rate for people with disabilities was 26.9 percent, compared to 12.2 percent for people without disabilities.

Statistics don’t tell the whole story.

Parental caregivers worry about what happens to their developmentally disabled children when they grow up. As the statistics on disabilities have shown, their chances of obtaining employment, decent living arrangements, or achieving financial independence are significantly compromised. Government assistance and nonprofit agencies are helpful, but their resources are insufficient when it comes to overcoming the barriers that persons with disabilities face in society. A different model is needed that rises to the occasion.

Necessity Becomes the Mother of Invention

Parents and primary caregivers are taking matters into their own hands. They are starting businesses and nonprofit charities so their adult child can know independence and achieve a greater sense of belonging.

Outlined below are several examples of a larger growing trend — social enterprises that embrace the concepts of social entrepreneurship and inclusivity, and have a passion for working with developmentally disabled people.

First Place®

Aspiring to serve as a catalyst for international models, First Place® provides a supportive housing and residential transition program for individuals with autism and people with other disabilities. Folded into their program are sites for education, training, and creative inspiration.

First Place-Phoenix, the 501(c)(3) nonprofit charitable organization’s first new property, leases 55 apartments where residents are supported by a suite of resources and amenities that are designed to maximize independence, community integration, personal enrichment, and quality of life.

The Southwest Autism Research & Resource Center operates the two-year, tuition-based First Place Transition Academy, building crucial independent living and career-readiness skills for 32 participants each year.

First Place Global Leadership Institute works toward increasing the number of housing options available to persons with disabilities. The Institute collaborates with educators and medical professionals, focuses on autism research, and develops leadership skills and competencies to advance promising best practices.

Luna Azul

Located in Phoenix, Arizona, Luna Azul is the first for sale residential community in the nation that is specifically designed for adults with disabilities. This one-of-a-kind community consists of 30 single-family, cottage-style residences in a planned “pocket neighborhood” of smart homes. A partnership with Partners4Housing provides an online matching platform to help people move into independent housing. The homeowner’s association employs a full-time, on-site director and overnight staff to promote community engagement, safety, and peace of mind for the resident population and their caregiving families.

Not Your Typical Deli

Not Your Typical Deli is a full-service delicatessen and bakery, located in Gilbert, Arizona. It was created with a special purpose in mind — not only do they serve award-winning food, they also provide an integrated work environment for those with developmental disabilities. On average, 60 to 70 percent of their workforce is made up of adults with autism and/or other developmental challenges.

NYT Deli serves as a job-training site, offering three 12-week training programs per year for adults with developmental disabilities. Because of its popularity, the restaurant has a huge backlog of applicants to work at the deli. Rather than expand the deli, the owners created the Not Your Typical Culinary Academy to prepare students for employment in the restaurant or hospitality industry.

Spencer’s Place

Spencer’s Place is a coffee shop and bistro in Surprise, Arizona. The small business employs individuals with cognitive and developmental disabilities. Per their website, these individuals are able to “earn a paycheck, build relationships, gain a sense of purpose, and show the community the beauty of diversity and inclusion.” Spencer’s Place was created in partnership with the Employed and Overjoyed Foundation to promote equal employment opportunities for persons with disabilities.

Social entrepreneurship is the driving force for innovative business solutions that create employment opportunities and supportive housing for people with disabilities. That mindset is channeled through social enterprises that have a double bottom line of profit/loss and social impact.

Editor’s Note: The Case for Inclusion Report 2019, a publication of United Cerebral Palsy and the ANCOR Foundation, ranked Arizona #1 in their state rankings for performance in serving individuals with intellectual and developmental disabilities.

May 12, 2020June 27, 2020

5G Broadband: The Next Generation

Photo by Ookla®

Does your community’s strategic economic development plan envision a vibrant 5G broadband future?

Broadband infrastructure is critical for business growth, improvements in productivity, and economic competitiveness. Advanced broadband is essential for the delivery of business, education, government, healthcare, workforce development, and other Internet services. More than ever, communities connected to fast, reliable broadband are finding themselves on the winning side of the digital divide.

What is 5G?

Fifth-generation (5G) is the next generation of wireless technology. It refers to the latest deployment of mobile broadband networks that will eventually replace, or at the very least, enhance the fourth-generation (4G) of broadband cellular network technology. Operating in a similar fashion, 4G technologies succeeded 3G, itself an upgrade to the older 2G and 1G networks.

Each successive generation of mobile broadband is characterized by higher connectivity speeds and increased computing capacity. 5G cell towers are up to 100 times faster than current 4G technology. Where 4G cell towers can accommodate a few thousand Internet of Things (IoT) devices per square mile, 5G cell towers are capable of supporting millions of devices. 5G promises to unleash a torrent of industrial IoT applications and help make smart cities a reality.

Deployment

In 2020, the three largest U.S. wireless carriers — AT&T, Verizon, and Sprint | T-Mobile — are building out 5G to their customers. Each carrier has their own plan for rolling out their 5G network, allowing for their current infrastructure and capital improvement plans to install fiber-optic cable in rights-of-way. Three different versions are being built: (1) mmWave high-band 5G; (2) Mid-band 5G; and (3) Low-band 5G.

Millimeter wave (AT&T, T-Mobile and Verizon) is optimal when fast connectivity speed is taken into consideration. However, users have to be located within a relatively short distance (800 feet) from a transmission tower to take advantage of those speeds. The majority of carriers are offering this service in a few hand-picked areas, most typically in the downtown or other high-density areas.

Mid-band 5G (Sprint) and low-band 5G (AT&T, T-Mobile) is available in the market for the majority of consumers. In the near-term, there won’t be much of a change from 4G connectivity, but 5G is poised to become a game-changer.

Interactive Ookla 5G Map

Last year, Ookla launched an interactive map showing all the 5G networks in the world. The map is updated weekly from verified public sources and Ookla data, allowing interested parties to follow carriers’ newest 5G networks online. Currently, there have been 7,775 deployments by 122 carriers around the globe. This provides economic development practitioners and their strategic partners with in-depth insights from a competitive positioning standpoint. The information can serve as a kickstarter for a constructive dialogue with local carriers.

National Strategy to Secure 5G

The Trump Administration released the National Strategy to Secure 5G in March 2020. This 6-page document focuses on four lines of effort that explain the Administration’s vision for managing 5G infrastructure in the future. Included is guidance on how to facilitate domestic 5G rollout, cybersecurity, risk-management, and the promotion of responsible global development and 5G deployment.

U.S.-China 5G Competition

The U.S. and China are engaged in a battle for 5G leadership. U.S. officials are concerned about China’s Huawei and ZTE, two suppliers of networking equipment that seek to dominate the 5G market. Their concerns extend to national security and unfair trade practices — Chinese government espionage, illegal behavior, and heavy state subsidies are well-documented. Complicating matters is the competitive landscape, with European-based Ericsson and Nokia being the only other global firms capable of confronting the Chinese threat. Exasperating the situation is the scarcity of U.S. competitors who make the same networking equipment. Meanwhile, national policymakers are wrestling with how to implement the nation’s 5G network, industry standard-setting and patents, and the global supply chain (Lee, 2020).

Local 5G Strategies

Major U.S. cities were selected for the nation’s earliest 5G deployments. The introduction of 5G promises to radically change how people access the Internet. It will also have a transformative impact on key industries — agriculture (crop monitoring, water management), transportation (autonomous vehicles), financial services (remote transactions), manufacturing (smart factories), healthcare (telemedicine), energy (oil, gas, electricity), media and entertainment (augmented reality), retail (mobile shopping) — and smart cities.

Indiana 5G Zone

The Indiana 5G Zone is a well-recognized best practice that will provide a high return on investment for economic development. This space is co-located in the Downtown Indianapolis Eleven Fifty Academy, an education non-profit organization that helps professionals upskill and launch careers in technology. The zone’s mission is serve as a catalyst for accelerating 5G-related technologies throughout the state and support the technology’s deployment in industry and academia — enhancing Indiana’s competitive position in the process.

This collaborative effort was spearheaded by the Indiana 5G Forum. Its members include AT&T, Verizon, Purdue University, Eleven Fifty Academy, Indiana IoT Lab, Indiana University, and the University of Notre Dame. The initiative is sponsored as part of a strategic partnership with the Indiana Economic Development Corporation.

Is your community prepared for the coming 5G age?

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