Designing Entrepreneurial Solutions to Address Urban/Inner City Problems

By Robin Newberger, David Tarver, and Maude Toussaint-Comeau

Encouraging business formation, increasing employment, and improving quality of life in inner cities are a few of the most important but most challenging goals for both policymakers and community development professionals serving economically marginalized urban areas. Urban/social entrepreneurs are taking on many of these challenges, designing market-based solutions to address urban problems in the transportation, education, housing, and safety spheres, among others. Self-employment and business creation (including sole proprietorships) have been on the rise in urban areas away from central business districts, including in some inner cities throughout the country, in many instances at rates comparable to surrounding suburbs. (See Figures 1 and 2 for trends in self-employment and small businesses in the U.S.). Employment clusters in the transportation, health, entertainment, education, medical, and technology sectors are making inner cities more competitive, and offering opportunities for business expansion particularly responsive to urban and inner city settings.1

Trends in Small Businesses Across Neighborhoods

Source: Authors’ calculations based on Dun and Bradstreet and geocoding analysis of Local Origin-Destination Employment Statistics (LODES) data (Hartley et al, 2015, “Are America’s Inner Cities Competitive? Evidence from the 2000s”).

Trend in Self-Employment / Entrepreneurship

Source: Authors’ calculations of (imputed) trends based on American Community Survey and geocoding analysis of Local Origin-Destination Employment Statistics (LODES) data (Hartley et al, 2015, “Are America’s Inner Cities Competitive? Evidence from the 2000s”).

In October 2015, the Urban Entrepreneurship Initiative held its annual Urban Entrepreneurship Symposium in Detroit, co-hosted with the University of Michigan, Michigan State University, Wayne State University, and the New Economy Initiative, bringing together entrepreneurs, academics, community development experts and funders to discuss the challenges and opportunities in urban inner city areas, and showcase examples where entrepreneurs have turned business ideas into success, creating employment for inner city residents across skill levels.2  Most of the discussions centered on contextual problems in Detroit, although the issues are similar in many other U.S. cities.

The premise of the meeting was that urban entrepreneurship is distinct from entrepreneurship more generally, in that urban entrepreneurs often create their businesses with an awareness of a particular urban problem, consistent with the adage that the business owner can “do well while doing good.”3 This is an emerging way of thinking about entrepreneurship and the business opportunities in inner cities, and the discussions at the conference were designed to showcase this orientation. In this blog, we summarize some of the main lessons learned from the conference discussions, built around this new urban entrepreneurship paradigm.

Urban Problem Mining

The new approach to entrepreneurship highlighted at the conference involves mining the intersection of technology, business development and community engagement to bring about greater opportunity within cities. In contrast to standard business training, which emphasizes business plans as the first step, this paradigm encourages entrepreneurs to consider “the problem space” in a given urban setting, and then how to tailor a business idea in a way that addresses it. This approach parallels approaches that have gained currency in engineering schools across the country, where the focus of learning has moved away from designing products and towards designing solutions.

Urban Entrepreneurship Model

Source: David Tarver, Urban Entrepreneurship Initiative

Shocking the (Urban) World

The conference featured several urban businesses–large and small–that demonstrate this new type of thinking. For example, where many see a lack of quality education as a problem in urban areas, urban entrepreneurs have created small tutoring companies that use technology like Google Hangout to reach students throughout the country. At a larger scale, the transportation company Uber has responded to the absence of reliable, flexible transportation in many urban areas by deploying telecommunications and GPS technologies. Detroit’s Splitting Fares, another ride service, uses technology to facilitate communication and transportation. Metro EZ Ride, also in Detroit, partners with faith-based and workforce development organizations to rent unused vehicles for people who do not have access to transportation to jobs located outside of the city. According to the representative who spoke at the conference, they have hired 50 drivers to drive as many as 250 people per day to work in warmer months, and 800 per day during colder weather. Shotspotter uses technology to provide real time alerts to law enforcement in various cities as to where gunfire occurs, contributing to safer communities and improving the business environment of inner cities.

Obviously, cities still need more traditional businesses like restaurants and retail merchants. However, the urban entrepreneurship model provides tools for businesses to build upon a location’s comparative advantage(s), and address contextual disadvantages. This includes large businesses like Shinola, a manufacturer of watches, bicycles, and leather goods that provides entry-level jobs and skilled employment to more than 550 people in Detroit. As a representative of Shinola explained, the company chose Detroit with the understanding that they could build upon the manufacturing and steel production experience of workers.

Engaging the Community

It takes knowledge of a community to come up with business-based solutions to urban problems. As with any group of people, inhabitants of inner cities often distrust the idea of people from outside of their areas imposing solutions to local problems. As a presenter from the session on community engagement strategies put it, “anything for us, without us, is not about us.” That is why community engagement and even community organizing are integral to this model. Presenters at the conference spoke to the range of methods that have been used for soliciting community participation, including surveys, data analysis, interviews, focus groups and other methods. For example the Detroit Dialogues undertook a bike and walking tour initiative that went door to door collecting people’s personal accounts of what it means to them to be in their neighborhoods.4 Using a multiplicity of ways to engage with the community also reveals what works and what does not in terms of understanding a community and its concerns.

Accessing Capital and Funding

A model-based approach to addressing urban problems is not all that is needed to support business growth and formation and create jobs. Entrepreneurs and small business owners in many cities report difficulties in getting access to financing. Limited access to bank credit, equity capital, or even personal networks creates genuine barriers for many business owners and aspiring entrepreneurs (e.g., Figure 4 shows trends in CRA-reported small business bank loans). For the Urban Entrepreneurship Initiative, these financing challenges make an even stronger case for conceptualizing an urban business as one that responds to an urban problem.

Bank Loans to Small Businesses

Source: Authors’ calculation based on CRA small business loans and geocoding analysis of Local Origin-Destination Employment Statistics (LODES) data (Hartley et al, 2015, “Are America’s Inner Cities Competitive? Evidence from the 2000s”).

Conclusion

The Urban Entrepreneurship Initiative is pursuing the same fundamental goals as many other initiatives focusing on inner cities, that is, to support businesses that provide products and services for people in urban areas. Their contribution to the discussion is the recognition that the same techniques that architects and planners have used for generations to apply design solutions to buildings, roads, and public spaces, can now be applied to urban challenges like education, public safety, transportation, and others. Using this approach, the intent is to bring new technologies to old problems, and in doing so, inspire students, academics, business people, and funders to test new ways to improve the quality of life in urban areas. Moving forward, the goal is to integrate scalable strategies into the model, to bring about the kind of businesses that will create jobs and economic development a more significant way.

1. Newberger and Toussaint-Comeau, “Revitalizing Inner Cities: Connecting Research and Practice,” November 2015, Chicago Fed Letter No. 346. https://www.chicagofed.org/publications/chicago-fed-letter/2015/346
2. https://www.youtube.com/playlist?list=PLmNrnoyQ30KvLo1XXFkAc5GnuNod7EWfZ
3. Osorio, A.E., and B. Ozkazanc-Pan, “Defining the ‘Urban’ in Urban Entrepreneurship: Implications for Economic Development Policy,” Academy of Management Proceeding, January 2014. http://proceedings.aom.org/content/2014/1/12486
4. Clack, A., “How Storytelling heals and strengthens communities,” http://www.springboardexchange.org/features/aspenartsfeature3.aspx. Also see the New York Time Magazine, July 13, 2014, “Detroit Through Rose-Colored Glasses” for a collection of photos and stories of people in Detroit. http://www.amazon.com/The-New-York-Times-Magazine/dp/B00LZ0EG4U
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Upcoming Chicago Fed conference: Labor Issues Facing Agriculture and the Rural Midwest

by David Oppedahl

On November 17, 2015, the Federal Reserve Bank of Chicago and the Upjohn Institute will hold a conference to explore labor issues affecting agriculture and the rural Midwest. The conference will be preceded on November 16, 2015, by the performance of a play that deals with immigrant experiences in agriculture, followed by a policy discussion. Visit www.chicagofed.org/events/2015/annual-agricultural-conference for more details and to register. Feel free to contact David Oppedahl at 312-322-6122 with any questions about these events.

Concerns about population losses, work force vitality, employment skills, health issues, and economic growth that lags that of urban areas have persisted for years in the rural Midwest and throughout the U.S. This has led to much discussion of a rural/urban divide in the nation (see an example from Governing).

Manufacturers often complain that a skills gap prevents them from expanding and hiring additional workers. Agricultural businesses also face challenges to meet their labor needs, and sometimes rely on immigrant workers. There are implications for rural areas not only due to a shortage of U.S. workers, but also to matters related to worker compensation (see, for instance, a recent Department of Labor ruling). Moreover, non-farm employment can be vital for the livelihood of many agricultural families, even as farm employment remains a key component of rural income in the Midwest. In addition, health insurance coverage continues to be a critical factor for farm households and rural workers.

At the upcoming conference, experts from academia, industry, and policy institutions will discuss work force trends, labor challenges, and ways to improve living standards in the rural Midwest. The goals of the conference include: understanding key issues related to rural and farm labor; describing the effects of labor challenges in rural areas; examining policies that affect rural and farm jobs; and discussing possible strategies to position the midwestern economy and agriculture for a prosperous future.

In the final panel discussion of the day, moderator Bill Testa will provide an overview of trends in skilled worker location. As skilled workers, especially younger workers, gravitate toward large metropolitan areas and their central cities, smaller metropolitan areas, towns, and rural areas increasingly struggle to develop, attract, and retain the skilled work force they need for existing and new businesses and investment. And from an individual worker’s perspective, the choice to work outside of a large labor market area may result in a narrower set of career and skills acquisition opportunities, as well as a loss of wage income. The panelists will address: 1) how communities can best address these challenges; and 2) how workers can choose a smaller town or rural location without unduly sacrificing career opportunities and high wages.

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A New Tool for Measuring the Convergence of Community Development and Public Health

By: Emily Engel & Susan Longworth

Continuing efforts to facilitate opportunities for the community development and public health sectors to collaborate in order to maximize resources and impact, the Community Development and Policy Studies Division at the Federal  Reserve Bank of Chicago introduces MeasureUp, an online application recently released by the Build Healthy Places Network that will help to communicate data across the two sectors. MeasureUp houses data from the Robert Wood Johnson Foundation, Community Commons, and PolicyMap, amongst others to enable practitioners, policy makers, advocates, and others to: 1) measure health-related impacts and picking individualized metrics using tried-and-true measurement tools; 2) use mapping tools to prioritize the needs of specific neighborhoods; 3) find evidence for the impact of collaborative work on health and well-being; 4) make the case to funders and investors; 5) read stories of success at the intersection of health and community development; and 6) identify opportunities for partnerships with organizations in other sectors.

For example, below is map produced by the Center on Society and Health at Virginia Commonwealth University that documents life expectancy across various “L” transit stops in Chicago. Similar maps exist – or are in the planning stages – for other cities.

VCU Map shows the distances between the largest gaps in health i

Source: MeasureUp, available at http://buildhealthyplaces.org/measureup/mapping-tools.

Another example is the map below, accessed through MeasureUp, created with data from Community Commons, which shows Chicago metro places where greater than 25 percent of the population does not have a high school diploma (areas in purple), where greater than 30 percent of the population is below the poverty level (light brown), and areas where both of those conditions co-exists (dark brown). Also indicated on the map are public hospitals (dark blue squares with “H”), private hospitals (light blue squares with “H”) and community health centers (green circles with a cross). (Green squares with an “H” indicate some “other” form of health provider.) Given that educational attainment and poverty are two primary indicators of vulnerability, this map provides an indication of where these areas of need exist in relation to health care facilities and where concentrations of population with low education and poor health indicate areas of need.

ccMapExport

Source: Community Commons via MeasureUp: http://assessment.communitycommons.org/Footprint/ 

Click here for other examples of how MeasureUp works: http://www.buildhealthyplaces.org/6-ways-measureup-matters-for-your-work/.

 

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Get to Know the Community Reinvestment Act

CRA Video Imageby Jason Keller

Every year, the Community Reinvestment Act (CRA) helps federally insured regulated financial institutions meet the credit needs of the communities in which they operate.[i] To this end, CRA supports affordable housing efforts, small business and small farm development, as well as other initiatives that revitalize and/or stabilize low- and moderate-income communities. Thus, understanding how this law works is essential for banks looking to make impactful loans and investments, nonprofits seeking funding, and communities wanting to ensure their financial institutions are operating in fair and responsive ways. In sum, the CRA plays an important role in ensuring fair access to credit and other financial services both nationally as well as specifically throughout Illinois, Indiana, Iowa, Michigan, and Iowa (the 7th District).

The Federal Reserve and other regulatory agencies follow set guidelines and policies to evaluate the CRA performance of regulated banks. Each bank’s performance is measured against the unique credit needs in its defined assessment area(s), and the results of these evaluations are made public. This transparency in the process allows for more open dialogue between financial institutions, governments, and other constituents to ensure local community credit and service needs are being met.

The Federal Reserve’s commitment to CRA goes well beyond this supervisory function, however. Each Federal Reserve Bank is staffed with a team of professionals, often with advanced degrees in urban planning, public policy, finance, and law, who engage financial institutions and community stakeholders in conversations about CRA requirements, as well as broader community development issues and best practices. They serve as a conduit between financial institutions and the communities they serve by helping banks understand their CRA obligations and, perhaps more importantly, by convening meetings, roundtables, and conferences, as well as publishing targeted research to engage local and regional partners in discussing community needs.

While the CRA has been at the core of a movement away from top-down government programs towards locally-based strategies, oftentimes, its provisions are not well understood. Whether you’re a banker, community leader, or consumer, take a moment and watch this short video to get to know the CRA.

To learn more about the CRA and how the Federal Reserve System supports local and community and economic development efforts, visit: FedCommunities.org, Community Development Data Guidebook, Understanding Community Development Needs through the CRA Performance Context, and A Banker’s Quick Reference Guide to CRA.



[i] See Community Reinvestment Act (CRA), available at http://www.federalreserve.gov/communitydev/cra_about.htm.

 

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A Roundtable on the State of Housing in Chicago and Cook County

by Jason Keller

The term “community development” is narrowly defined in the Community Reinvestment Act (CRA). However, one of the more prominent components is lending and investment in affordable housing (including multi-family and rental units) for low- and moderate-income residents.[i] The Fed’s Community Development and Policy Studies (CDPS) division works to foster the active engagement of depository institutions in providing financing for affordable housing (as well other banking activities) to communities, particularly underserved and economically struggling ones. CDPS partnered with HOPE NOW and Neighborhood Housing Services of Chicago (NHS) to host a roundtable at the Federal Reserve Bank of Chicago on May 11, 2015, to discuss the current landscape of affordable housing in the greater Chicagoland area. Approximately 65 bankers, practitioners, researchers, and housing advocates attended the event.  

HOPE NOW is a Washington, DC, based national alliance between counselors, mortgage companies, investors, and other mortgage market participants. The organization works to bring together homeowners, communities, and government partners to address challenges in the mortgage market. HOPE NOW servicers reported almost two million “solutions” for homeowner in default or facing foreclosure (modification, deed-in-lieu of foreclosure, short sale, or other means) in 2014.[ii] NHS is Chicago’s largest nonprofit neighborhood revitalization organization and works in partnership with businesses, government, and neighborhood residents to revitalize low- and moderate-income neighborhoods throughout northeastern Illinois, specifically Chicago, south suburban Cook County, Elgin, and the Fox Valley.[iii]

The roundtable opened with a state of the housing market report by Geoff Smith, the executive director from the DePaul University Institute for Housing Studies (IHS). IHS’s mission is to provide reliable, impartial, and timely data and research to inform housing policy decisions and discussions in the Chicago region, as well as nationally.[iv] Using data from IHS’s housing data clearinghouse, Smith noted that Cook County’s housing prices continue to rebound after the recession, but market conditions overall remain varied across neighborhoods. Prices in the county’s strongest real estate markets are nearing previous peak levels, while prices in more distressed areas are below 2000 levels. Smith described how vacancies and foreclosures continue to be concentrated in the south and western parts of the city of Chicago and suburban Cook County, although foreclosure filing activity had continued to decline countywide. Smith explained that the foreclosure filings in the most distressed neighborhoods of Cook County had returned to pre-2005 levels. The number of properties completing the foreclosure process and becoming bank owned real estate is also decreasing across all communities. Generally speaking, the flow of mortgage credit into Cook County neighborhoods slowed in 2014 due to declining levels of refinancing, but Smith contended that access to mainstream financial markets and mortgage loans is lacking in moderate- and highly-distressed neighborhoods. In these areas, cash buyers continue to make up a substantial portion of sales activity. In sum, while Cook County’s housing market is recovering, home values in many of the areas that were most heavily impacted by the foreclosure crisis have yet to return to pre-recessionary levels. 

The roundtable then focused on three panel discussions: one on Local Outreach Partnerships; one on Real Estate Owned (REO) Strategies; and one on The New Buyer Pipeline. These sessions highlighted progressive strategies to address blight, urban decay, and improved access to quality affordable housing throughout Chicagoland. Attendees learned more about the Chicago Micro Market Recovery Program (MMRP).[v] The Program’s goal is to improve conditions, strengthen property values, and create environments supportive of private investment in targeted markets throughout the city by strategically deploying public and private capital and other tools and resources in well-defined markets. There are currently 13 targeted communities in the Program, including (but not limited to) Austin, Chicago Lawn, Englewood, North Pullman, and Woodlawn. Qualified homeowners can benefit from counseling from an accredited agency, receiving repair grants or other credits designed to stabilize communities. Individuals interested in purchasing or rehabilitating a home in an MMRP area may also be eligible to receive subsidies through the Neighborhood Stabilization Program (NSP) or the City of Chicago’s Tax Increment Finance – Purchase Rehab initiative.     

The roundtable closed with a description and a call to action to promote a homeowner outreach event at Olive Harvey College – one of the City Colleges of Chicago, on May 27, 2015. At this event, over 300 at-risk homeowners got the opportunity to meet with mortgage servicers, lenders, housing counselors, and investors in a safe and secure environment to discuss their particular situations. Events like these are often held across the United States to help struggling homeowners learn more about loan modifications, short sales, forbearance, and other non-foreclosure options.

To learn more about specific services offered by HOPE NOW, visit www.hopenow.com. For more information on what the Federal Reserve System is working on to support affordable housing initiatives across the country, visit Fed Communities.



[i] See A Bankers’ Quick Reference Guide to CRA, available at https://www.dallasfed.org/assets/documents/cd/pubs/quickref.pdf.

[ii] See HOPE NOW, available at http://www.hopenow.com/about-us.php.

[iii] See Neighborhood Housing Services of Chicago, available at http://www.nhschicago.org.

[iv] See Institute for Housing Studies at DePaul University, available at http://www.housingstudies.org.

[v] See City of Chicago Micro Market Recovery Program, available at http://www.cityofchicago.org/city/en/depts/dcd/supp_info/micro_market_recoveryprogram.html.

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Community Development and Policy Studies (CDPS) Update

In the Community Development and Policy Studies (CDPS) Department’s field work throughout the Seventh District, CDPS contacts – in varying contexts – have voiced concerns about conditions impacting low- and moderate-income (LMI) communities. CDPS’ goals include conducting research on community and economic development topics that impact lower-wealth, lower-income, and recent immigrant populations, as well as other economically disadvantaged communities. CDPS conducts regular surveys of people representing organizations that serve LMI communities in varying ways. CDPS survey respondents represent organizations in the fields of: real estate development; finance; financial counseling; economic development; banking; consumer advocacy; small business development; philanthropy; law; higher education; agriculture; manufacturing; and human services. This blog is a summary of workforce development responses from the latest CDPS survey. 

From the most recent survey (echoing past surveys) many respondents believe that high school students are not learning fundamental skills in school (primarily math and sciences) and that there is a mismatch between what the companies are looking for and the skills that job candidates have to offer.  Additionally, respondents noted that companies with jobs openings are not willing to provide on-the-job training.  In the past, this sentiment seemed to run through all the responses, but during the most recent survey there were respondents that highlighted that there were qualified applicants to choose from.  This slight change in sentiment might come from the fact that some respondents noted that community/technical colleges and universities in their area have added courses to address fundamental skills issues, and to provide curricula in specialized training for certain industries.

For example, a contact from Wisconsin highlighted a few examples of higher educational facilities either responding to community needs or working with companies to help their community fill more specialized rolls by tailoring training: (1) The Milwaukee Area Technical College (MATC) is expanding its welding program after receiving an overwhelming response for the free welding class they offered (tuition and fees were covered under a Department of Labor grant); (2) fourteen manufacturers are working with the Lakeshore Technical College in Manitowoc to create a production technician boot camp aimed at recent high school graduates as well as the unemployed and underemployed; and (3) a new endowment to support organic crop research funded by Cliff bar and Organic Valley has been established at University of Wisconsin Madison.

An upcoming blog will highlight more in depth information on LMI communities. CDPS along with community development departments at the Federal Reserve Banks in Boston, Dallas, Kansas City and Philadelphia recently disseminated a brief survey to many contacts within their Districts, which addresses key areas of concern for LMI populations as well as organizations that serve marginalized populations.  We are hoping the responses provide us with a better understanding of regional conditions affecting LMI populations with respect to both trends over time and as compared with other regions of the country.

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Preview of the upcoming Summit on Inner City Economic Development in Detroit

By Martin Lavelle

In a recent blog, I shared my observations about Pittsburgh’s efforts to revitalize its urban core. Then, I analyzed the extent to which Pittsburgh’s turnaround can serve as a model for Detroit as its city leaders and stakeholders look to revitalize the city’s urban core. While Detroit has begun to replicate the efforts of other cities, such as showcasing the city’s riverfront with the Detroit RiverWalk and collaborating with regional leaders and stakeholders, overall its efforts lag those of other Rust Belt cities. The relatively sluggish pace of Detroit’s efforts to revitalize its urban core are also reflected in the slow development of the city’s business clusters, including new business formation. Meanwhile, other parts of the Rust Belt have advanced the development of their respective business clusters, such as West Michigan’s office and institutional furniture cluster and Pittsburgh’s advanced materials and energy clusters (page 5).

Policy professionals, researchers, and other experts will gather in Detroit for a two-day summit–“Revisiting the Promise and Problems of Inner City Economic Development,”—at the Renaissance Center on September 15th and the Federal Reserve Bank of Chicago—Detroit Branch on September 16th. The summit will look at new research and best practices in the field of urban revitalization. It is sponsored by the W.E. Upjohn Institute for Employment Research, the Initiative for a Competitive Inner City (ICIC), the Federal Reserve Bank of Chicago, Economic Development Quarterly, and Sage Publications. For those interested in attending, there is no registration fee but advance registration is required here.

Day 1 will focus on what’s currently happening in Detroit, with an introduction by the Chicago Fed’s Regional Research staff and a bus tour of Detroit provided by the Chicago Fed’s Community Development & Policy Studies group. The tour will highlight some of Detroit’s successes and challenges in its effort to revitalize its urban core and how the three levers of growth—business environment, clusters, and individual firms—are promoting and complementing the efforts of Eastern Market and Midtown Detroit. Eastern Market’s food cluster is expanding in part because of greater economic growth within the city of Detroit. Part of that growth is originating from the development of an innovation district along Detroit’s major boulevard, Woodward Avenue, which is helping to draw young entrepreneurs to work and live in Midtown Detroit. In addition, the tour will illuminate some of what Detroit must still overcome on the path to renewal. The first day ends with a presentation by Detroit Free Press writer John Gallagher, who will share his thoughts about the city.

The second day of the summit will feature two keynote addresses. ICIC Founder and Chairman Michael Porter will look back on his research of clusters and their competitive advantages in inner cities. Later on, Matthew Cullen, President and CEO, Rock Ventures LLC, will provide insight into how his firm has helped contribute to Detroit’s recent surge in economic development. Other featured speakers include Carol O’Cleireacain, Deputy Mayor for Economic Policy, Planning, and Strategy, City of Detroit. Sessions on the second day will examine new thinking on the competitiveness of inner cities and opportunities for business in the inner city. 

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Redefining Rustbelt: Making Broadband Available to Residents and Small Businesses in Detroit, Charlotte, Cleveland, and Philadelphia

By Robin Newberger and Maude Toussaint-Comeau

In the digital era, broadband is essential for running a business, finding a job, and getting and receiving most types of mainstream data and information.  Yet disparity in broadband use remains a concern across communities, affecting both businesses and households. The Federal Reserve Bank of Chicago-Detroit Branch recently organized its fifth videoconference discussion with the Federal Reserve Banks of Cleveland, Philadelphia and Richmond on the topic “Broadband: Infrastructure of the Future,” bringing together experts and stakeholders in each city to share strategies related to digital inclusion, broadband financing models and their impact on businesses and community development.

“Broadband” technically means a wide bandwidth data transmission that enables rapid movement of multiple electronic signal and traffic types simultaneously. The extent of broadband access depends largely on infrastructure availability and affordability.  Broadband is provided by a range of media (e.g., cable, telephone wire, fiber, satellite, and wireless) that give users the ability to send and receive data at speeds greater than traditional “dial-up” Internet access over telephone lines.[1]  In January 2015, the Federal Communications Commission (FCC) raised the minimum download speeds from four megabits per second (Mbps) to 25Mbps, and the minimum upload speed from 1Mbps to 3Mbps. Download speed is a measure of how fast a connection delivers content to your computer or local area network.  Upload is the measure of how fast content is delivered from your computer or local area network to others on the Internet. Mbps indicates the transfer of one million bits of data each second.

A 2013 Census survey found Detroit to be the least-connected city in the U.S. (of cities with over 100,000 people) in terms of household broadband subscriptions. About 46 percent of Detroit households subscribed to broadband services in 2013, meaning more than half of Detroit households lacked a fixed broadband Internet account (see table 1). About 53 percent had no paid internet connection at all.  Digital exclusion was more pronounced for lower-income residents. Almost two-thirds of households with incomes below $35,000 in Detroit reported no internet connection, compared to a third of households with incomes above $35,000 in Detroit.These gaps are likely to grow under the new broadband standards.  DSL service, which is delivered over telephone lines, does not generally accommodate the new download/upload threshold speeds.   

Table 1 can be seen by clicking: Digital Divide Blog Table

According to a 2015 report from the FCC, eight percent of Americans living in urban areas throughout the U.S. lacked physical access to broadband under the latest Mpbs definitions. Data from Michigan shows 12 percent of households (about 450,000 households) were unserved by fixed broadband platforms with download speeds above 25Mbps in 2014.  Although more than 20 broadband providers operated in Wayne County as of October 2014, a third of them offered service below the new definition of minimum download speed. Within Detroit, pockets of the city remain without high-speed internet (see figure 1).  Thus residential users and home-based businesses located in certain areas are more challenged than those in other parts of Detroit in terms of their access to broadband technology.

Figure 1 (click image to enlarge)

Digital Divide 1

Source:  FCC.  See https://www.fcc.gov/maps/2015-broadband-progress-report-fixed-broadband-deployment-map

STRATEGIES FOR INCREASING BROADBAND ACCESS AND DIGITIAL INCLUSION

Subsidizing the Cost of Subscribing:

At least part of the solution lies in helping lower-income people pay for internet service. Federal policy may be particularly important in this regard; the FCC put forward a proposal in May 2015 to provide needy households with a subsidy for either phone service, Internet service or a mix of both through its Lifeline program. Proponents of this plan suggest that if the subsidy encourages more lower-income households to sign up for broadband access, this may encourage the private sector to create new offerings for lower income consumers.[2] Among current corporate initiatives, Comcast began offering a $9.95 monthly service to certain low-income households in 2011 through its Essentials program. The City of Charlotte, which participated in the videoconference, was selected for Google gigabit service that provides internet speeds of 1000 megabits per second, for which the company has promised options for low-income customers.

Building Infrastructure Affordable to Lower-Income Households

In each of the cities that participated in the videoconference, reducing costs for the end-user has been the main idea behind the various efforts to expand broadband access through community-based networks. Cleveland has been part of the Mobile Citizen project wherein educational, social welfare and nonprofit organizations lease excess radio spectrum to cell phone companies (in this case Sprint), and in exchange get access to low cost service which they can pass on to their own customers. In Detroit, the Community Telecommunications Network, a nonprofit technology organization associated with Wayne State University, Detroit Public Schools and Detroit Public Television, attempted a broadband expansion project in 2009 with an award from the Knight Foundation. Also in Detroit, Allied Media Projects partnered with the Open Technology Institute of the New America Foundation in 2012 to create the Digital Stewards Program, which deploys mesh wireless networks in neighborhoods and community centers beamed from the rooftops of low income housing units 

Using Training from Nonprofits to Make the Internet More Accessible:

Participants at the videoconference highlighted the role of community computing centers as a low-cost way to provide internet access and digital training to residents of lower-income neighborhoods. In Philadelphia, a citywide coalition of community-based groups developed the KEYSPOT Network to provide free Internet access and computer training to thousands of people, funded initially through federal stimulus dollars from the Broadband Technology Opportunity Program.  In Ohio cities as well as in Detroit, the nonprofit OneCommunity also used funding from the Broadband Technology Opportunity Program to create the Connect Your Community program, a two-year program to provide broadband training and low-cost equipment for low-income households. In Detroit, the Community Telecommunications Network teamed up with neighborhood nonprofits includingMatrix Human Services and Focus: HOPE to recruit more than 5,000 people to receive training and Internet access, funded by the Knight Foundation. An important feature of these programs has been to provide refurbished computer equipment to people who complete the training modules.

Using Internet Training as a Launchpad for Technology Training

Some nonprofits that teach digital literacy also have the potential to deliver workforce development training. The idea is that entry-level technology training can serve as the first step to move people into jobs. Within Detroit, Matrix Human Services, a social service agency, operates a Tech Lab that teaches computer skills to help people advance in their careers. Focus: Hope,  a community development organization, offers programs ranging from basic computer training, to IT training for specific industry certifications, to programs like the Information Management System Engineering program through which students pursue a technical or college degree.  Harmony Point, which offers digital literacy training, supports a model whereby community computing centers become Internet outposts in “digital deserts,” as well as places were neighborhood residents receive training to manage those centers.  Indeed, a major reason that Allied Media developed the Digital Stewards program was to train residents to design the network, build skills, and thereby empower community leadership. The importance of tech training for job placement was the motivation behind the White House’s 2015 initiative Detroit Tech Hire, a project that is calling upon some of Detroit’s largest employers (GM Onstar, Quicken Loans, etc.) to train and hire local, low-skilled workers for jobs in software development, network administration and cybersecurity.  

Broadband access depends on the physical deployment of infrastructure, as well as on affordability and demand among end users, some of whom may not fully grasp the potential and benefits of high-speed internet access. Detroit nonprofits and educational institutions have made considerable investments in connecting lower-income neighborhoods with broadband infrastructure and reducing the cost of service.  They have built community partnerships, adapted training curricula, donated equipment, and tapped into government and corporate resources. These efforts are not limited to the cities that participated in the videoconference, as the National Digital Inclusion Alliance includes nonprofits from around the country working to reduce disparities. As the standards for broadband speed evolve with new applications, and as new high-speed service providers like Rocket Fiber enter the Detroit market, it remains to be seen whether a growing number of households and small businesses, particularly those in lower-income areas of the city, will benefit from the economic, social and educational opportunities that come with access to broadband.

 


[1]See Lennard G. Kruger,  “Broadband Internet Access and the Digital Divide: Federal Assistance Programs,” available at: https://www.fas.org/sgp/crs/misc/RL30719.pdf

[2] Wired, Why Helping the Poor Pay for Broadbank is Good for Us All, available at: http://www.wired.com/2015/05/helping-poor-pay-broadband-good-us/

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Community Development and Policy Studies (CDPS) Update

In the Community Development and Policy Studies (CDPS) Department’s field work throughout the Seventh District, CDPS contacts – in varying contexts – have voiced concerns about conditions impacting low- and moderate-income (LMI) communities. CDPS’ goals include conducting research on community and economic development topics that impact lower-wealth, lower-income, and recent immigrant populations, as well as other economically disadvantaged communities. CDPS conducts regular surveys of people representing organizations that serve LMI communities in varying ways. CDPS survey respondents represent organizations in the fields of: real estate development; finance; financial counseling; economic development; banking; consumer advocacy; small business development; philanthropy; law; higher education; agriculture; manufacturing; and human services. This blog is a summary of workforce development responses from the latest CDPS survey in conjunction with feedback from recent publications and a Federal Reserve conference.

After exploring the question of workforce skills shortages and/or mismatches with city leaders during the Industrial Cities Initiative, CDPS has put workforce development front and center. From the most recent survey, echoing past observations from city leader interviews, the broad consensus is that high school students are not learning the fundamental skills in school or that there is a mismatch between what the companies are looking for and the skills that job candidates have to offer. (There is much debate, however, about the role of structural versus cyclical forces impacting worker demand and employment levels. Peter Cappelli, Professor of Management and Director at the Center for Human Resources, Wharton School of the University of Pennsylvania, spoke about this at the Future Focus: Preparing for Workforce 2020 conference at the Federal Reserve Bank of Chicago in February 2015. For further information, please see our prior blog about the conference.

The Federal Reserve Bank of Chicago is engaged in the workforce development discussion and has published a couple pieces on the subject since the topic was one of the themes raised during our Industrial Cities Initiative. A 2013 edition of ProfitWise News and Views highlighted community college efforts to partner with major employers to train workers: Community Colleges and Industry: How Partnerships Address the Skills Gap. CDPS is continuing to learn about the actions that community colleges take through our survey. During this round of the survey, we learned that community colleges around the District are: (1) taking an active role in helping students determine what jobs will be in demand after graduation; (2) becoming more attuned to demands of manufacturers and other higher skill industries in the community; and (3) creating more industry/college partnerships.

In 2014, an entire edition of ProfitWise News and Views was dedicated to leading workforce development practices: From Classroom to Career: An Overview of Current Workforce Development Trends, Issues and Initiatives.

CDPS has further examined the subject by co-hosting a one-day conference with Northern Illinois University Center for Governmental Studies (CGS) entitled Future Focus: Preparing for Workforce 2020, on February 19, 2015. The event brought together approximately 100 academics, workforce intermediaries, financial institutions, and municipal leaders to discuss both workforce development challenges and successes locally, regionally (specifically in Illinois, Indiana, and Wisconsin), and nationally. Please visit the Future Focus: Preparing for Workforce 2020 website for a detailed agenda and links to the presentations from the conference.

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CDPS Convenes Thought Leaders on Workforce Development

By: Emily Engel and Jason Keller

Stemming from the Industrial Cities Initiative, which explored the economies of former Seventh District manufacturing hub cities over 50 years, the Chicago Fed’s Community Development and Policy Studies (CDPS) has placed a continued focus on workforce development and its relevancy for marginalized populations. Among various events and publications, a 2013 edition of ProfitWise News and Views highlighted community college efforts to partner with major employers to train workers for unfilled positions (Community Colleges and Industry: How Partnerships Address the Skills Gap). And in 2014, an entire edition of ProfitWise News and Views explored leading workforce development practices (From Classroom to Career: An Overview of Current Workforce Development Trends, Issues and Initiatives).

On February 19, 2015, CDPS and the Northern Illinois University Center for Governmental Studies (CGS) co-hosted a one-day conference entitled “Future Focus: Preparing for Workforce 2020.” The event brought together over 100 researchers, workforce intermediaries, financial institutions, and municipal leaders to discuss workforce development–challenges and successes–locally, regionally (specifically in Illinois, Indiana, and Wisconsin), and nationally.

The conference opened with remarks by the Vice President and department head for CDPS, Alicia Williams, who touched on the ways CDPS supports Fed mandates, and linked bank investments in workforce programs to potential for CRA credit. She further highlighted the workforce related findings of a long-term CDPS project called the Industrial Cities Initiative (ICI). This project focused on Midwest cities that were once manufacturing centers but shifted to a more diverse and in some cases struggling economies. ICI was motivated by questions about why some Midwest cities outperform other cities with comparable histories and manufacturing legacies.

Daniel Sullivan, Executive Vice President and Director of Research at the Federal Reserve Bank of Chicago, then provided an economic overview that included his perspectives on both the structural and cyclical problems in the labor force. Both issues impact the ability of workers to find jobs, whereas most references to skills gaps focus only on the structural aspects. Certain segments of the U.S. labor force lack strong job skills, he noted, but this problem is longstanding and did not emerge in 2008. The fact that even some well-qualified workers struggle to find employment also indicates the changing employment landscape has outpaced growth. Sullivan stated that, due in part to the Fed’s accommodative monetary policy decisions since 2008, some economists project that full employment of the current workforce is not too far away.

Peter Cappelli, Professor of Management and Director, Center for Human Resources, Wharton School of the University of Pennsylvania, was the conference keynote speaker. His findings on worker skills and employment have received national attention, as he challenges the common assertion that (broadly speaking) workers lack needed skills. Dr. Cappelli asked the audience ‘why employers continue to complain about not finding the candidates they want?’ His presentation then centered on dispelling what he perceived to be myths surrounding: (1) traditional graduate and undergraduate curricula; (2) the skills gap/the failing of K-12 schools and the lack of science, technology, engineering, and mathematics (STEM) programs; (3) and the notion that today’s positions simply require more skills than people have. While all of these factors could reasonably contribute to the problem of matching workers to open positions, Cappelli closed by explaining the real gap as that most employers lack the ability to truly manage their own talent and therefore cannot plan or train for future workforce needs given all the uncertainty in the market. Cappelli suggested that employers should be more realistic about hiring, wages, and about developing versus (primarily) recruiting talent. He contends that employers should focus on talent management rather than working to populate a just-in-time workforce, which he described as a highly inefficient process.

The day’s first panel, “Using data to identify future workforce needs,” discussed the impact of changing workforce needs due to industry sophistication. The panel commented on this along with the pending “grey tsunami” that will hit as the baby boom generation begins to exit the workforce. These trends will significantly affect the availability of workers in the future, in both urban and rural communities. As a result, federal, state, and local agencies are closely monitoring workforce trends to better address the changing skills needed and the training required to produce high quality workers. The session described efforts underway by several agencies to improve education efforts and better understand the gaps between the supply and demand for workers. In light of the expected changes in the new federal Workforce Innovation and Opportunity Act, panelists highlighted the need for enhanced data portals and other aggregation methods to improve decision making in meeting employer needs.

Three breakout sessions in the afternoon focused on workforce trends and effective practices in: (1) attracting and retaining talent; (2) upgrading skills of the under-qualified; and (3) overcoming barriers to employment.

The panel on “attracting and retaining talent” covered three topics spanning various levels of workforce preparation. Comments were offered on trends and opportunities in higher education. Other remarks centered on the important role that immigrants play in filling jobs ranging from highly specialized technical occupations to seasonal agricultural workers. The panel also included a socio-psychological context for understanding the aspirations and work ethic of “millennials,” the cohort that will soon dominate the American workforce.

The panel on “upgrading the skills of the under-qualified” covered an array of topics from preparing low-skilled workers for more advanced work to apprenticeships for high-skilled manufacturing work. The panel offered practical examples for the ways in which the workforce system helps meet employer needs and provides meaningful employment opportunities for workers.

The third panel “overcoming barriers to employment” addressed concerns heard from employers: (1) “I can’t find skilled workers;” (2) “I can’t keep skilled workers;” and (3) “why won’t workers show up?” Collectively, however, the panel laid out a larger challenge — one of a worker quantity shortage — and the need to tap into the “the chronically unemployed.” Further, the panelists identified many barriers certain workers face that employers seldom appreciate: lack of reliable and efficient transportation, inconsistent available working hours, and basic employability screening. To reduce such barriers, panelists suggested a better coordination between employers, service organizations, training providers, and the workers themselves.

The day concluded with an interactive session on strategic opportunities for strengthening workforce systems to promote collaboration. The twin aims of this session were for participants to leave with: (a) ideas for strategies they can implement to strengthen local and regional workforce systems; and (b) new contacts with peers in the region with whom they can collaborate. Groups were asked to respond to the following four questions:

1. What opportunities to better address the skills gap came out of the presentations that apply to your local workforce development system?
2. How can local workforce agencies better engage employers to address the skills gap?
3. What two things you (and your agency) can do to meet potential workforce development changes in your region?
4. Would your organization like to learn more and possibly participate in a broader regional collaborative?

In sum, by discussing exemplary programs addressing the perceived skills gap both locally as well as nationally, CDPS along with CGS encouraged stronger alliances amongst participants in hopes of having a better understanding and tools with which to address current and future workforce needs.

Please visit the Future Focus: Preparing for Workforce 2020 website for a detailed agenda and links to the presentations from the conference.

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