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When most people picture economic development, they think of smooth-talking economic developers convincing companies to bring their jobs and investment to a community in exchange for free infrastructure improvements and tax breaks. They picture backroom deals at the steakhouse and golf course. While this may be true in some communities, there is a growing movement towards equitable economic development. In today’s Morning Buzz, I will talk about that growing movement through the following three points:
- Traditional economic development has become outdated
- Why we need to shift to equitable economic development
- Some quick tips and resources if you want to do equitable economic development
Traditional Economic Development Models Are Outdated
Traditional economic development has historically focused on recruiting projects where a state and/or local government competes with other regions to see who can provide the best offer (i.e. tax incentives) to a company to bring jobs and capital investment to a community.
This model works great for larger corporations as they can play local governments against each other (i.e. Amazon HQ2) to get the best financial offer. It often creates a race to the bottom for local governments. These projects regularly fail to generate the jobs and investment they promised.
A recent WRAL news investigation found that a third of state-incentive funded economic development projects in North Carolina failed to generate a single new job and only 20% of performance based incentive funding in North Carolina’s incentive program have been paid out due to lack of performance.
There is additional issue with traditional economic development when approaching it from an equity lens. These projects while focused on creating jobs in a community often don’t create jobs that fit the local workforce profile or they bring in workers from other communities so that local residents, especially lower socioeconomic and communities of color, may not benefit from the new jobs.
We need to shift focus towards economic mobility
Fortunately, there is a new trend in economic development called equitable economic development. Econsult Solutions describes this movement as being able to, “unlock the full potential of the local economy by dismantling barriers and expanding opportunities for low income people and communities of color.”
Equitable economic development focuses on supporting economic development through the existing community, typically by focusing on small businesses and entrepreneurs.
This approach allows you to create tailored approaches for the diverse communities within your broader community and build the economy with and for your residents.
This approach brings with it many benefits. The first is that it tends to be significantly cheaper than traditional economic development. The below chart from the Center for American Progress shows the cost breakdown per job of various economic development strategies.
Another benefit is that small businesses keep more money in the community versus larger companies. The American Independent Business Alliance estimates that 13.6% of revenue generated by chains remains local compared to 48% of independent revenue.
A third benefit is that small businesses are statistically more likely to be minority and/or woman owned versus larger corporations. CNN reports that 6.2% of fortune 500 CEO’s are women while data shows that 40% of privately held companies are owned by women. Additionally, women owned businesses are more likely to be minority owned then male owned businesses.
Couple of quick tips
You might be thinking that sounds great but how do I do it? I have a few quick tips and strategies that you can apply to your community.
The first tip is to shop local. Instead of buying business meals and supplies from national companies, purchase them from local companies. Consider breaking down your single janitorial contract for five facilities into five separate contracts to make it easier for local firms to win those contracts. Also consider your procurement requirements/process and if they create unnecessary barriers for small businesses.
The second tip is to ask your local small businesses and aspiring entrepreneurs what their barriers to starting, operating and growing their businesses are. While there are general barriers that they will face regardless of community, the magnitude of those barriers will vary, and each community will have its own unique barriers.
Some of those barriers may include permitting, access to capital, available and affordable real estate, business acumen, and talent pool. After you learn about the barriers, ask them what you can do to help them overcome those barriers.They NEED to be at the table helping create the solutions that will serve them (design thinking is a great framework to use for this).
The third tip is to think about what other organizations can help you support small businesses. In many communities, you will have affinity business groups and local business alliances that can help you support their members.
Also consider engaging non-traditional economic development groups such as ones that support freelancers and the arts community. Anchor institutions in your community like hospitals and universities can also be great economic development partners. Work with them on community development efforts and encourage them to have strong diversity within their supplier and vendor pipeline.
Lastly, think about programs that you can create to support small businesses. This can include grant and loan programs for small businesses. Something to consider when creating these programs is that many small businesses (especially women and minority owned businesses) struggle to get traditional loans because of an inability to make a down payment, local governments can step in and provide low-interest gap loans to provide small businesses with down payments.
Also, research if your state provides grants to launch main street programs and consider ways to use CDBG funds to support economic development.
In summary, equitable economic development focuses on building up a community and it starts by deciding to focus on your community and listening to challenges and needs.
The Opinions Expressed In This Post Are My Own And Not Necessarily Those Of My Employer