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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2014 Summary: Community Development and Policy Studies Update

In Community Development and Policy Studies (CDPS) field work throughout the Seventh District, CDPS contacts – in varying contexts – have voiced concerns about conditions impacting low- and moderate-income (LMI) populations and communities. CDPS conducts regular surveys of people representing organizations that serve LMI communities in varying ways. Our 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 responses from the 2014 CDPS surveys based on the three charts below.

As indicated by the graph below, respondents over the course of 2014 believe that many issues are impacting the single family housing market. Over 50 percent of respondents each time we asked felt that the oversupply of vacant homes and the inability of buyers to get mortgages were the two biggest issues affecting the LMI communities in 2014.

Chart 1 2014 UpdateClick to enlarge

As indicated by the graph below, respondents over the course of 2014 differed to some degree on the primary sources of community development financing in their areas. The three sources noted the most each time we asked the question in 2014 were government, community development financial institutions (CDFIs), and banks.

Chart 2 2014 UpdateClick to enlarge

As indicated by the graph below, respondents over the course of 2014 believe that many institutions are involved in community development efforts in their region. The four leading types of organizations (over 50 percent each time we asked the question in 2014) were nonprofits, government, community based organizations, and developers.

Chart 3 2014 UpdateClick to enlarge

In addition to hearing from respondents about what is happening in community development on a periodic basis, the survey also supplemented research in CDPS and respondents comments’ were summarized in a ProfitWise News and Views in 2014, “From Classroom to Career: An Overview of Current Workforce Development Trends, Issues and Initiatives,” in addition to numerous blogs.

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What’s Missing? How Bankers and Community Development Finance Practitioners Can Reach Diverse Business Owners and Neighborhoods in Detroit

By Robin Newberger and Maude Toussaint-Comeau

The Minority Capital Access forum in October 2014, hosted by the Community Development and Policy Studies Department, brought together panels of experts to reflect on recent efforts in Detroit to support small business owners, and to identify strategies that help funders connect with minority businesses with capital.[1]

Panelists representing banks and nonprofit lenders delivered a realistic assessment of the capital landscape and structural challenges facing many small business owners. They discussed the impact of the slow recovery and depressed real estate values on equity and collateral values in certain Detroit neighborhoods and the relative paucity of credit-building opportunities for entrepreneurs of color.

Panelists, however, conveyed an optimistic message regarding the increasing assortment of offerings within the capital continuum. The organizations represented at the forum provided a sense of these opportunities. In terms of nonprofit lenders, the Detroit Development Fund described itself as a “double-A ball club for banks” – the last stop one would make before establishing a borrowing relationship with a commercial lender. Lending between $50,000 and $250,000, and requesting three years of operating history compared to the three years of profitable operations that banks typically require, the Detroit Development Fund relies heavily on low-cost (or free) capital for its loss reserves. Another CDFI, the Community Reinvestment Fund (CRF) based in Minneapolis, is one of 14 non-bank lenders with certification to originate SBA (insured) 7(a) loans of $50,000 to $4 million, but unlike most banks that offer this product, CRF targets borrowers of color or those located in low- and moderate-income census tracts in Detroit. [2] These kinds of organizations are lending to the businesses that typically do not fit bank underwriting criteria, such as start-ups (in general), franchises, gas stations, and restaurants.  Most recently, the Detroit Development Fund received additional (low-cost) capital for loss reserves, allowing the organization to lend for retail start-ups. An increasing number of requests for retail loans had come into their pipeline, and foundations understood how filling storefronts would have the potential to strengthen a community.

In terms of banks, traditional lenders are layering funds with resources from nonprofits and government to create, in their words, more “patient” sources of capital and to extend the capabilities of senior debt providers. In 2014, Urban Partnership Bank, a CDFI, collaborated with the Michigan Economic Development Corporation and Invest Detroit (a non-bank CDFI), among other community organizations, to lend $10 million to small business, nonprofits, and real-estate investors.  In the past year, Fifth Third Bank invested (with other banks and the Michigan Economic Development Corporation) in two funds, one called Grow Michigan, a subordinated debt fund of $500,000 to $3 million for lower/middle market enterprises in largely low to moderate income areas; and another called Develop Michigan, which finances commercial real estate projects with a focus on low- and moderate-income communities.

In addition, banks have gotten involved in credit-building activities such as the partnership between PNC and LISC’s Twin Accounts program, to help potential borrowers improve their credit scores.

As important as capital is, panelists suggested that improving the way information about these resources is transmitted may be just as valuable to minority business owners. Bankers and community funders agreed that many small business owners would benefit from better connections to information “brokers” to let business people know about many existing resources. Currently, many start-up firms, and even existing small and medium minority-owned businesses, do not know about the types of capital or assistance available and appropriate for their businesses. An intentional effort to connect business owners and relevant resources would go a long way to help credit- and resource- impeded business (and prospective business) owners.

One innovative approach has been for institutions to fund “translators” or consultants with ties to economically and socially disadvantaged communities who provide development and mentoring services to business people. The Detroit Microloan Collaborative funded this type of technical assistance so that intermediaries could address soft skills, such as helping business people build confidence, and provide financial management and business development assistance.[3] Some panelists emphasized the need for long-term technical assistance after a loan is made, as well, particularly for nascent entrepreneurs who do not have extensive business experience.

An alternative approach to connect entrepreneurs to business resources is to use new technologies and online tools. For example, Fundwell developed an online eligibility tool to match small business owners with a spectrum of lenders. Pacific Community Ventures has an offering called Business Advisory Services, whereby a small business, for a flat fee, obtains a certain number of matches to business advisors.  In Michigan, a program called Companies to Watch highlights and brokers resources for medium-sized companies that are in the second stage of growth. For small and medium-sized businesses, panelists identified organizations like the nationally-funded Manufacturing Extension Partnership Program that offers technical assistance for new technologies to U.S.-based manufacturers.  The challenge for small business people is both to know where their business fits along the capital spectrum and to know what resources are available to them.

Another way to ensure that entrepreneurs get the information they need is to enhance the skills and capacities of the service providers themselves. One large bank recently discovered that its staff’s limited understanding of the small business ecosystem impeded them from steering potential borrowers to the correct (continuum of) services. In addition, regardless of the demographics of a business owner, an important component of mentoring is functional and industry-specific information. The same content experts who advise people on running a retail business, for example, cannot be expected to advise a manufacturing firm or a high-tech spin-off from a university. According to one panelist, only a small number of intermediaries grasp the importance of connecting minority-owned businesses to the innovations taking place at incubators, research labs, and university offices of technology and commercialization.  One way for intermediaries to get a better understanding of the particular industries and niches of their small business clients is to examine, and possibly even develop, market data. A study recently commissioned by a local foundation was able to identify the supply chains for growing industries in southeast Michigan, and the various ways that minority owned small firms can serve these industries (logistics, design, engineering, workforce development, etc.). This approach has yielded results even when the opportunities are not in the high-growth or high-tech areas. Thus, one of the most impactful ways to help businesses reduce their risk profile, according to one panelist, is for intermediaries to help small businesses identify their first, second and even third customers, to ensure that revenue is sufficiently diversified.

In addition, minority entrepreneuers need intermediaries able to provide referrals across the financing spectrum.  While the minority business community depends heavily upon debt, other types of capital, including private equity, venture capital, and even crowd funding, remain largely underutilized. Most organizations that work with minority business owners do not have sufficiently trained (or experienced) staff to advise on sophisticated transactions themselves, nor do they have the resources to contract with someone with that expertise. Consultative groups for minority-owned businesses, such as Meda in Minneapolis, rely on partnerships with corporate volunteers to advise on any type of business need that walks from access to private capital to mergers and acquisitions.  In addition, the minority-led National Association of Investment Companies represents minority-owned and managed private equity firms that invest in ethnically diverse communities. However, limits on this type of expertise mean fewer mergers, acquisitions and joint ventures take place among business owners of color. This deficiency is important given the well-documented lack of equity capital among minority entrepreneurs, according to panelists, and the fact that equity capital is often needed for minority entrepreneurs to grow.

 


[1] This forum was part of the CDPS Detroit Small Business Project, and was presented in partnership with the Asian Pacific Chamber of commerce, Michigan Black Chamber of Commerce, Michigan Hispanic Chamber of Commerce, the Michigan Minority Supplier Development Council and the Michigan Small Business Development Center.

[2] JPMorgan Chase Foundation provided the $7 million grant as part of the foundation’s CDFI Collaboratives program, a $33 million commitment to help CDFIs and small business lenders jumpstart job creation in low- and moderate-income communities in Chicago, Denver, Milwaukee, Detroit, Seattle, Buffalo and the New York City Metro area.

[3] The informal collaborative includes the Detroit Development Fund, the Michigan Women’s Foundation Detroit Micro-Enterprise Fund and is funded through a $5 million line of credit from Huntington Bank LifeLine Consultants offers the business development and mentoring services.

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Community Development and Policy Studies Update

In Community Development and Policy Studies (CDPS) field work throughout the Seventh District, CDPS contacts – in varying contexts – have voiced concerns about conditions impacting low- and moderate-income (LMI) populations and communities. CDPS conducts regular surveys of people representing organizations that serve LMI communities in varying ways. Our 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 responses from the latest CDPS survey.

As indicated by the graph below, respondents in the most recent survey believe that many institutions are involved in leading to community development efforts in their region.
Click to enlarge
Click to enlarge

It is important that a wide array of institutions is helping people build the skills that are needed in the workforce, because most contacts noted that this continues to be an issue in their respective markets. Contacts noted that this issue could arise from a variety of circumstances including: (1) a dearth of students choosing science-based subjects in school; (2) lack of basic writing skills; and (3) too many students without a high school diploma. While community colleges cannot directly address all of these issues, according to almost all contacts, they are stepping in to tailor curricula to align with critical jobs skills in demand by (local) employers address these issues by: (1) identifying high demand local/regional employer skills; (2) focusing on developing critical thinking skills and improving communication skills; and (3) collaborating with other organizations. One example of collaborating with other organizations would be Milwaukee’s Green Skill Project that wrapped up this summer. It brought together industries, a technical college, community-based organizations as well as public and private funders. The program also partnered with Jobs for the Future to win a U.S. Department of Labor Green Jobs Innovation grant award.

The Federal Reserve Bank of Chicago is engaged in the workforce development discussion and is hosting a conference, Future Focus: Preparing for Workforce 2020, on February 19, 2015. The conference will be held in conjunction with The Center for Governmental Studies at Northern Illinois University. The one-day conference is designed to promote cross functional collaboration to support decision-makers and practitioners in identifying and implementing future-focused workforce development strategies. Attendees will learn more about the latest research and information on workforce trends, policies and practices. Please look for registration on ChicagoFed.org in January 2015.

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From classroom to career: An overview of current workforce development trends, issues, and initiatives

By Emily Engel and Daniel DiFranco

Community Development and Policy Studies’ (CDPS) most recent Profitwise News and Views (PNV) entitled, “From classroom to career: An overview of current workforce development trends, issues, and initiatives,” derives from CDPS’ Industrial Cities Initiative (ICI). Since workforce development was the most common and the most vexing issue identified by leaders in every ICI city profiled in the report, CDPS decided to examine the issues in greater depth. This PNV issue has four main articles and four insets, each revolving around a different aspect of workforce development:

  1. “Employment polarization and its discontents: A tale of two tails” describes the steady replacement of middle-wage (and presumably middle-skilled) jobs by low- and high-wage jobs.
  2. “Is there a skills mismatch: A technical view” reviews the term mismatch.
  3. “Employer involvement” describes employers’ efforts to address what they see as a skills gap.
  4. “Is a college education worth the cost? A risk/reward perspective” examines the puzzling trend of slowdowns in educational attainment despite rising demand for high-skilled workers.
  5. “Integrated Postsecondary Education Data System” describes the strengths (and limitations) of a dataset well suited for tracking educational outcomes among postsecondary institutions.
  6. “Skills for a stronger middle class” gives an example of how the executive branch is getting involved in workforce development.
  7. “The Cara Program: Workforce development one life at a time” highlights a Chicago-based community organization that provides a persistently challenging — yet highly supportive — environment within which individuals may cultivate the soft skills necessary for navigating the modern workplace.
  8. “Second chances in the land of opportunity” details a smaller Cara program that focuses on formerly incarcerated individuals, since the barriers to employment this group faces are often so high.
  9. “Early childhood education: ‘Workforce development’ for the long run” highlights the work of advocates to bring early childhood education into the policy spotlight.

The Chicago Federal Reserve is not the only Reserve Bank that is focusing on this important topic. Workforce development is guiding community outreach efforts across the Federal Reserve System. The Kansas City and Atlanta Feds cohosted a conference entitled, “The Future of Workforce Development: Where Research Meets Practice,” in September 2012. They recently extended this discussion in a similar conference entitled, “Transforming the U.S. Workforce Development Policies for the 21st Century.” In the same vein, the Philadelphia Fed spearheaded efforts to convene community development professionals, academics, and leaders from the public and private sectors in a “Reinventing Older Communities: Bridging Growth & Opportunity” conference held in May 2014, an event co-sponsored with seven other Federal Reserve Banks – Atlanta, Boston, Chicago, Cleveland, New York, Richmond, and St. Louis.

Please read the 2014 Fall PNV Edition to learn more about system efforts regarding workforce development, as well as current trends, issues, and initiatives on the topic.

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Healthy Communities – Milwaukee

By Steven Kuehl

Building off the 2013 Healthy Communities Chicago Regional Summit, the Federal Reserve Bank of Chicago will be cohosting a conference, “Healthy Communities – Milwaukee,” on December 2, 2014, that explores the converging visions of community and economic development, public health, and the public safety/criminal justice system. This conference is part of the Healthy Communities Initiative[1] created by the Federal Reserve System and the Robert Wood Johnson Foundation. This initiative, under the leadership of David Erickson from the Federal Reserve Bank of San Francisco, raises awareness about research indicating that people who live in supportive, socially connected, and economically thriving communities tend to be healthier[2]. Erickson has proffered that community development finance provides, through various interventions designed to improve local conditions, the opportunity for otherwise disenfranchised populations to engage in their local ecnonomies, access critical services, and therby become more healthy productive citizens. Neither the economic nor health impact of these interventions are easily measured, but strong correlations between social/economic and physical health across large populations support the argument for improving conditions through this work[3].

However, unique to the Milwaukee gathering will be an exploration of the intersection of the community development field with the public safety/criminal justice system in order to secure positive public health outcomes. 

In Milwaukee, many concerned with the long-term welfare of the city want to explore linkages between public health, safety, and economic conditions. The district attorney and Wisconsin State Public Defender’s Office have long recognized that the individuals in the criminal justice system disproportionately come from communities with high rates of infant mortality, teenage pregnancy, lead and other environmental toxins, and communicable diseases. Further, many of residents of these communities also often suffer from chronic mental illness and/or substance abuse issues, which leads them to incarceration for minor, non-violent crimes. Many of these negative outcomes are driven by environmental factors, such as poverty, failing schools, unemployment, racial isolation, etc. These factors are commonly referred to as the social determinants of health.

More than $1 billion has been spent through various federal, state, county, and city programs over the past 10 years in Milwaukee’s low- and moderate-income neighborhoods. Despite this investment, socioeconomic condtions in these communities has not improved.

Erickson, while visiting Milwaukee in April, stated that Milwaukee is uniquely positioned among American cities; among other assets, it is small enough that all the representatives of key community resources know one another. This fact alone increases the odds for aligning resources and expectations toward productive policies and programs.

In Milwaukee, many concerned with the long-term welfare of the city want to explore linkages between public health, security, and economic conditions. The District Attorney and Wisconsin State Public Defender’s Office have long recognized that the individuals who disproportionately populate the criminal justice system come from communities highest in infant mortality, teenage pregnancy, and with (evidence of) lead and other environmental toxins, failing schools, and high rates of communicable diseases. Additioanlly, others who enter the criminal justice system suffer from mental illness and addiction. 

In response, court systems have begun to implement specialty courts like Drug Treatment, Veterans, Mental Health, and Alcohol to treat a broader spectrum of responses to problematic behavior. The recent advent of evidence-based practices has enabled courts and corrections to collect statistically valid information about every individual entering the system. This information permits a robust, data-driven analysis of subpopulations entering the criminal justice system. 

What has become increasingly clear is that persistent, complex community problems in Milwaukee – poverty, poor health, incarceration – cannot be solved by agencies or sectors working in isolation. Greater alignment and collaboration is needed among institutions relative to the deployment of resources and strategies if significant change and improvement is to occur. To establish the groundwork for the December 2nd Federal Reserve Bank of Chicago cosponsored conference, a series of community conversation “cafés” are being held in Milwaukee throughout October. The purpose of the cafés is to ensure that the conference and its follow-up activities reflect and address the perspectives and concerns of people from different sectors of the community.

The December 2, 2014, conference will bring together professionals from community and economic development, public health, the criminal justice system, and philanthropy to shed light on the social determinants of health and explore community-based models and strategies that address the socioeconomic conditions of a place through evidence-based practices. The agenda will be constructed, in part, from the outcomes of the cafés. A major component will be to connect emerging data about criminal justice system subpopulations with work being done in the fields of community and economic development and public health. The conference goal is to engage the whole community in a conversation on how different sectors can work together more effectively to make Milwaukee safer, healthier, and more prosperous. Additionally, appropriate follow-up activities that continue to shape new solutions will be discussed and planned.

Please visit the website for further information and to register for the conference on December 2.

 


[1]The Healthy Communities Initiative was designed to enrich the debate on how cross-sector and place-based approaches to revitalize low-income communities might both revitalize neighborhoods and improve health.  The Federal Reserve System and the Robert Wood Johnson Foundation created the Healthy Communities Initiative to encourage stronger linkages between the two sectors and move them forward towards a healthier future.  Please visit the Healthy Communities Initiative website for more information. 

[2] David Erickson, et al., 2009, Community Development Investment Review, Volume 5, Issue 3.

[3] Ibid.

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CDPS Update

In Community Development and Policy Studies (CDPS) field work throughout the Seventh District, CDPS contacts – in varying contexts – have voiced concerns about conditions impacting low- and moderate-income (LMI) populations and communities. CDPS conducts regular surveys of people representing organizations that serve LMI communities in varying ways. Our 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 responses from the latest CDPS survey.

As indicated by the chart below, contacts believe that many issues impact the single family (1-4 units) housing market in their region. Some contacts explained that lenders are finding the new rules and regulations too cumbersome to continue lending at the same rate as before the recession. However, many home owners are still underwater and there is little home buyer demand given: job losses; wage stagnations; neighborhood deterioration; and vacant homes that blight many LMI communities.

September Blog ChartClick to enlarge

In the rental market, there were mixed comments, depending on the area the contact was describing. In stronger markets, where new rentals have recently come on the market, occupancy and rents are high. However, in LMI areas, occupancy rates are lower and rents are more affordable.

Many contacts also mentioned in open ended questions that the housing market (e.g., vacant building and foreclosures), in conjunction with employment issues (e.g., high unemployment and low wages), are still two of the biggest challenges to sustained growth/revitalization in their communities.

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CDPS hosts a conversation on apprenticeships in manufacturing

By Jason Keller

According to the U.S. Department of Labor’s Employment and Training Administration (ETA), registered apprenticeship, a model for preparing new generations of skilled workers that can be traced back to the Middle Ages, remains an important method for training and placing workers. The current surge in apprenticeship has evolved from emphasizing learning in the traditional construction trades toward a focus today on new and emerging industries, such as energy, health care, and information technology for example. Today’s apprentices are registered in “earn and learn” work programs with expert mentors in their fields, allowing them to accumulate knowledge and build skills over time. The apprentice benefits by earning a fair wage as well as obtaining industry-recognized credentials and/or college credits. The 150,000 employers and other labor management organizations who already participate in the program also benefit because apprentices are not only placed on a structured learning track, but the industry-based training is specifically designed to meet employers’ current standards and practices. The various programs also have the capacity to track trends in demand, deploy resources, and match workers according to need. The success of apprenticeships’ on-the-job learning, combined with related technical instruction, leads toward a more highly skilled and highly productive workforce.

The Federal Reserve Bank of Chicago has long been interested in employment conditions as it seeks to promote the Fed’s dual mandate of maximum employment and sustainable economic growth.[1] For example, in 2011, Community Development and Policy Studies (CDPS), a division of the Chicago Fed, launched its Industrial Cities Initiative.[2] Known as ICI, this study took a closer look at ten former industrial/manufacturing hubs and their economic evolution over the last 50 years. The ICI paid particular attention to the labor force in these cities and the steps taken by local leaders, community colleges, and other labor organizations to meet demand for vocational and technical training by major employers.

In April 2014, the White House announced that the United States Department of Labor (DOL) will make $100 million in existing H-1B funds[3] available in the form of American Apprenticeship Grants. Expected to launch in the fall, this will be a competitive application process to award grants to partnerships that help American workers participate in structured apprenticeship programs. The grants are intended to encourage new apprenticeships by incentivizing employers, labor organizations, and training providers to work cooperatively. Awards are also intended to promote apprenticeships as pathways for further learning and career advancement, as well as to bring-to-scale exemplary models that work.[4]

To better inform the business and civic communities about this renewed commitment to the apprenticeship model and solicit feedback, the DOL worked with local intermediaries to hold a series of industry roundtables across the country throughout the month of June. The meetings brought together local leaders, employers, and labor organizations each with a vested interest in workforce development. The sessions were segregated by cluster: transportation and logistics (Atlanta), health care (Boston), construction (Washington DC), energy (Houston), and information technology (San Francisco).[5] The session held at the Federal Reserve Bank of Chicago on June 19 focused entirely on manufacturing by bringing together nearly 100 policymakers and practitioners on the topic of apprenticeship.

At the Chicago roundtable, Labor Secretary Thomas E. Perez[6] explained that the apprenticeship model is a “linchpin” and a “catalyst” toward sustainable economic vitality and job growth in this country. His remarks set the stage for an informative discussion on the needs, challenges, opportunities, and solutions for using apprenticeships in both traditional and advanced manufacturing.

Roundtable attendees were asked to comment on the following questions:

  • What are your current and future talent needs?
  • How can registered apprenticeships meet those needs?
  • What are the challenges to using registered apprenticeships?
  • What innovative solutions could be expanded and replicated?
  • What support is needed to advance registered apprenticeship efforts?

Results from the June roundtables will help the DOL determine if current federal policy pertaining to apprenticeship programs is effective or if additional enhancements are needed.

The Federal Reserve Bank of Chicago appreciated the opportunity to engage with the DOL in this important discussion. For more information on CDPS, please visit the Community Development & Policy Studies home page.[7] Additionally a recent ProfitWise News and Views article, Community Colleges and Industry: How Partnerships Address the Skills Gap[8] provides more information about community college and industry partnerships in the Seventh Federal Reserve District states of Iowa, Illinois, Wisconsin, and Michigan.


[1] See the Federal Reserve System mission statement, available at http://www.federalreserve.gov/aboutthefed/mission.htm.

[2] See the Federal Reserve Bank of Chicago’s Industrial Cities Initiative, available at http://www.chicagofed.org/webpages/region/community_development/community_economic_development/ici/ici_profiles.cfm.

[3] H-1B funds projects that provide training and related activities to workers to assist them in gaining the skills and competencies needed to obtain or upgrade employment in high-growth industries or economic sectors.

[5] American Apprenticeships: Industry Roundtable, available at: http://www.doleta.gov/oa/pdf/industry-FS-4.pdf.

[6] Thomas E. Perez biography, available at: http://www.dol.gov/_sec/.

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