Contact: N. David Milder, Editor The ADRR — The American Downtown Revitalization Review 718-805-9507 [email protected]
THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)
There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR. It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.
This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.
How to Subscribe to The ADRR
Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).
How Issues of The ADRR Will Be Distributed.
New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.
The Content We Are Aiming For. Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.
Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.
Who Will Write the Articles?
Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. — who have significant downtown related knowledge and experience.
Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them. However, there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!
Article Length and Author Responsibilities.
There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.
Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.
How It Will Be Organized.
The ADRR will be published by an informal group for its first year, with no person or group having ownership.
Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.
The Advisory/Editorial Board :
Jerome Barth, Fifth Avenue Association
Michael J Berne, MJB Consulting
Laurel Brown, UpIncoming Ventures
Katherine Correll, Downtown Colorado, Inc.
Dave Feehan, Civitas Consulting
Bob Goldsmith, Downtown NJ, and Greenbaum Rowe
Stephen Goldsmith, Center for the Living City
Nicholas Kalogeresis, The Lakota Group
Kris Larson, Hollywood Property Owners Alliance.
Paul R. Levy, Center City District, Philadelphia
Beth Anne Macdonald, Commercial District Services
Andrew M. Manshel, author
N. David Milder, DANTH, Inc
John Shapiro, Pratt Institute
Norman Walzer, Northern Illinois University
Articles in our first issue that will be published in June 2020
Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
Roberta Brandes Gratz, “Malls of Culture.”
Andrew M. Manshel, “Is ED Really a Problem?”
N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
Katherine Correll, Downtown Colorado, Inc.
David Feehan, Civitas Consulting
Isaac Kremer, Metuchen Downtown Alliance
Errin Welty, Wisconsin Economic Development Corporation.
Back in October of 2017, DANTH, Inc posted my white paper “Toward an Effective Economic Development Strategy for Smaller Communities (under 35,000)”(1). A central concept in that strategic approach was the STEEs (Small Town Entrepreneurial Environments). I then stated that: “Though I strongly suspect that such environments exist today somewhere in the USA, to date, I have not encountered one.” I then proceeded to outline what I then thought the major components of s viable and effective STEE might be. Since then, I have done additional research and visited and worked in a number of smaller communities and learned a good deal more about possible STEE components. The objective of this article is to detail those recent findings.
Viewing STEEs as Informal Business Incubators.
For a number of years now, I have been arguing that small town downtowns could be informal business incubators. My recent work made me realize that STEEs function much like informal business incubators. They are informal in the sense that all the elements of a business incubator are not in one building operated by an organization tasked to do incubation. Instead, they are dispersed within a downtown in different locations, and each may have a separate management organization. An interesting blog post by Jim Metcalf on the SCORE blog argues that incubator functions may be spread beyond the downtown and be found in the whole small town (2).
Formal business incubators have long been a fairly widely adopted economic development tool. I would argue that they will always have a vital role to play for firms that have substantial growth aspirations, that yearn to be big in terms of revenues, profits and employees, that want to be the next Apple, Facebook or Amazon. However, that usually means that the formal incubator will nurture a relatively small percentage of the businesses in a smaller community. For example, the well regarded Wyoming Technology Business Center operates incubators in the cities of Laramie,Sheridan and Casper and:
In Laramie ,the incubator has 8 clients and there are 657 residents who are self-employed, but have unincorporated businesses in the city (see Table 1).
In Sheridan, the incubator also has 8 client sand there are 340 people who are self-employed, but have unincorporated businesses in the city.
In Casper, the incubator has 12 clients and there are 1,567 people who are self-employed, but have unincorporated businesses in the city.
Informal incubation functions can help the micro and very small businesses that are usually fairly numerous even in smaller towns, as is evidenced in Table1. Their operators very often have more modest aspirations, mainly focused on how to have more stable and/or higher annual personal incomes and the steps that might help them to achieve those goals.
Many of these micro business operators work from their homes. Back in the 1990s, these home-based operators were not deemed of interest by many economic development experts, because it was thought that their numbers were few and that they seldom if ever hired any employees. More recent research, however, suggests that their numbers are far from insignificant and, at least in some instances, can be very significant (3). As Dave Carlson, the administrator of Lancaster. WI, has noted, these micro businesses, in aggregate, can equal the number of jobs provided by his town’s largest employer. Also, recent research indicates that these home-based entrepreneurs may indeed hire some employees (4).
My recent work in a few smaller communities in Upstate NY confirms Metcalf’s view – the towns had many incubator components, and many were frequently being performed in the town, but not in the downtown. The downtown obviously will be stronger if it’s the location where the vast majority of these functions are performed.
STEEs Do More Than Micro and Very Small Business Incubation
STEEs are very much related to the nurturing of creative endeavors within our smaller communities. However, they can also be a huge asset in the retention of a town’s current creatives and the attraction of more of them from other towns and cities. Those in large central cities within a 2.5to 3.0 hour drive are where the best prospects now live and work.
As I have demonstrated in several other articles and as noted in a recent article in the New York Times, a significant number of big city creatives are being drawn to rural local communities either as second homeowners or in complete, year round relocations (5). These relocations are being motivated primarily by quality of life considerations. While many create new jobs in their new towns, others bring their old jobs with them or create new jobs because the local broadband pipe allows them to telecommute. More affordable housing , a lower cost of living, family, great scenery, and a stronger sense of community are other Q of L lures.
Table 2, below, presents 12 STEE functions that are in bold and underlined type. The more of them that are present in a town, the stronger will be the town’s ability to attract and retain creative enterprises. The more of them that are in the downtown, the stronger it will be economically. Under each function are “tools” that can be used to perform that function. Here, the question is not how many can be used, but the strength with which they perform. Better to have one thing that really works than several of marginal utility. Yes, it’s better still to have several that really work well.
Many town and downtown STEE assets are not recognized or properly appreciated by local leaders. This matrix can be used by downtown leaders to assess their STEE assets. This should help them to then determine:
The elements they may want to think seriously about adding.
How the existing elements can be organized so that they are better known and more easily utilized.
How these STEE assets can be marketed to attract more creatives to move and do business in the community and the downtown.
The matrix includes such typical incubator functions as providing a work space, technical assistance for business operations (e.g., marketing, bookkeeping, human resource management, etc.), networking opportunities, and help with financing. It also includes such things as affordable housing, accessible broadband, and an existing cluster of creatives – important factors in recruiting creatives. Additional elements listed are the presence of an organization tasked to maintain and grow the STEE and someone to manage the provision of technical assistance. Downtown EDOs have typically avoided like the plague the latter two types of endeavors, but one may reasonably argue that, under the new normal, cultivating a strong, vibrant STEE will need to be a growing part of their missions.
About Specific Types of STEE Components
While in the past few years I have come across some co-worker spaces and a few incubators that are located in in small towns, they were not the STEE components that impressed me the most. Here are some that impressed me as being far more important.
Libraries. In more and more small towns, the public library has become – or is becoming – an anchor component for its STEE.Libraries are changing big time. As one blog has described it, many libraries are now “in the process of transitioning from a content collection-only facility to a content creation-inspired makerspace” (6). Not only do they provide spaces where “makers,” a term that is often broadly defined, can meet, learn from each other, and network, but they also provide a wide range of equipment the makers can use in the library. A few are even assembling an inventory of maker “kits” that are loaned out to makers for their use off site. Some librarians are arguing that libraries need to become “creative spaces.”
The Phillips Free Library in Homer, NY (pop 6,200) is a good example. It has two writers clubs, a film making club and a significant Makerspace, filled with a lot of equipment (see Table 3).
Arts Coops. In many of these small towns there are a fair number of artists and artisans. Few are likely to get all their incomes from their artistic endeavors, so many will need additional employment. As one artist in Small Town X told me, and several of his artist friends then concurred: “Small Town X is a great place for artists – except for those who want to earn a living.”
Most lack business related skills and want help in marketing and getting exposure. Unfortunately, it is often difficult to get these small town artists and artisans the technical assistance they need and often want because the assistance simply does not exist and/or the artists’ great need for independence, that they share with other small businesspeople, makes them resistant consumers.
In these small towns, getting say 20 artists and artisans the technical assistance they need may be a daunting and resource burning task.For that reason, coops are an appealing concept. When they are functional, they substantially diminish the needs of the participating artists for technical assistance. The coop can handle a lot of an artist/artisan’s marketing and bookkeeping needs, while creating a social network among the coop members.
However, coops are often unstable and short-lived. In recent months I have found one that closed, another that was reorganized and a third that appears to have some long-term stability. Even the venerable Torpedo Factory in Alexandria, VA, had a recent organizational and financial crisis. Someone, who was involved there on the management side, noted that managing artists was like trying to herd cats. Coop leaders very likely to face a similar challenge.
The questions that comes to my mind are:
Can the management of a coop be improved more easily, efficiently and effectively than improving the business-related skills of their 15 to 30 artist/artisan members? Getting them to individually attend an eight-to-ten month course comprised of four 10-hour workshops and up to six two-hour interim sessions, as a highly regarded program in Montana does, requires a significant amount of commitment from the artists/artisans.
The Montana program is indeed interesting and useful, as well as a model for similar efforts in other states. In Montana, it has improved the entrepreneurial skills of 400+ artists over 5 years, resulting in impressive increased net sales of 397% with a 44% increase in out-of-state sales, on average, since participating in the program. Nevertheless, I still find myself asking: could the development of a program aimed at making coops more successful be a cheaper and more productive way of meeting the technical assistance needs of artists and artisans (7)?
I do not know of anyone who has addressed the question of how to make arts coops more stable and successful. Someone perhaps should take a stab at it.
Vendor Marts. I have long been familiar with antiques malls, but somehow vendor malls, their kin, had not been on my radar until I recently came across one in a smaller community in Upstate NY. However, I had seen one in a downtown in NJ a few years ago that was being pitched as a retail incubator in the owners attempt to win support from the downtown’s EDO and city officials.
Indeed, my recently aroused interest in vender malls is precisely because of their incubation and STEE capabilities:
They provide small, maybe about 150 SF, and comparatively affordable spaces, maybe about $2,700/yr, for aspiring retailers, artists and artisans.
The vendors must “mind the store” and be behind the cash register for at least a few days a month, so they can get some retail experience. For many artists and artisans, whose primary concern is creating, not selling, this can be a very attractive feature.
Vendors that do well then can “graduate” and lease a regular storefront elsewhere in the downtown or town. The vendor mall I recently visited in Upstate NY had just had such a graduate.
Any competent downtown EDO should be able to set up a vendor mart in an empty storefront. It could increase the incubation capabilities of the vendor mart by helping the vendors learn about available technical assistance providers and then helping the vendors to connect with the TA providers. Of course, if the downtown already has a vendor mall, it could similarly increase their incubation capabilities.
Project Generated Local Investment Groups. A few years ago, in the twin cities of Scottsbluff and Gering in Nebraska, I came across informal investment groups that were formed within the local business community. One such group, for example, has helped the development of a new hotel in downtown Gering. I recently heard of similar type group being formedt o help fund the significant expansion of a local craft brewery in a smaller community also located in Upstate NY. The town may well have lost the craft brewery had not the local investment group emerged and taken action.
These groups usually are formed in response to a public need that has been identified by local officials or by well-known private sector needs.
Opportunity Zones (OZs). Recent congressional action has significantly increased the capital investment incentives that can be offered in OZs. While many in the economic development community are waiting to see how those incentives are used and the positive impacts they produce, there now is a hopeful optimism that those incentives can be powerful.
I have come across a number of downtowns that are entirely or partially covered by OZs, but do not tout them very much. Perhaps their new incentives are just too new for local leaders to figure out how they can be used. It also may be that the incentives go to Qualified Opportunity Zone Funds:
“A Qualified Opportunity Zone Fund is any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property (8).”
Many REITs and other commercial real estate investment funds are making OZ investments. For smaller towns to attract these big time investors, they will have to market the opportunities offered in the OZs and compete for the available investment dollars.
Might it be better to have the local residents and businesspeople who participate in the informal investment groups form their own QualifiedOpportunity Zone Fund?
Some Final Comments
Since I published the white paper I have been repeatedly impressed by what I have found in the smaller towns I have visited and read about. (See especially: “Our Towns: A 100,000-Mile Journey Into the Heart ofAmerica” by Deborah Fallows and James Fallows). I certainly recognized that they have significant challenges, but I also found a large number of capable and inventive people and capable organizations. Together, they are often building communities rich in their quality of life, if so far not in household incomes and corporate profits. There are often substantial human, organizational and economic resources in these communities that go unnoticed by outsiders and locals alike. Rather than disappearing, I expect that within the next 10 years or so our smaller communities, especially those within a three-hour drive of a major city, will become “hot” and attract many new residents and jobs. And that’s the view of a dyed in the wool New Yorker, who may like to visit smaller towns, but would never live fulltime in one – unless he has to.
3) “According to the 2012 GlobalEntrepreneurship Monitor (GEM) Report, 69 percent of all businesses are started from home and 59 percent are still operating from their homes three years later. Additionally, ‘only one-fourth of the entrepreneurs surveyed stated they had no employees working for their businesses. Given the high prevalence of entrepreneurs operating at home (two-thirds of Total Entrepreneurial Activity),this finding suggests that many actually had employees in their home-based businesses.’” Melissa Davidson. “FOCUSING ON HOME-BASED BUSINESSES: The Forgotten Sector. IEDC EconomicDevelopment Journal, Volume 17 / Number 1/ Winter 2018, pp.11-18, p 11.
7) For the Montana program see: https://art.mt.gov/map. “Artists in the program (2009-2014) report increased net sales of 397% with a44% increase in out-of-state sales on average since participating in the program, proving that the program works. The Montana Artrepreneur Program has earned national acclaim and has impacted nearly 400 artists across Montana.” “FY2019Activities
In October of 2017, I posted the above referenced White Paper that outlined my thoughts about how the construction of economic development strategies for smaller communities, especially those in rural areas, should be approached (1). Since then, two data-related findings have come to my attention that have caused me to review some of the arguments I presented in that paper:
I argued in the White Paper, reflecting conventional wisdom among economic development experts, that the lack of jobs was seen as an important constraint on the ability of small rural communities to prosper and retain their populations, especially their Millennials. My recommendations were to try to improve the ability of residents to earn more money and to recruit new residents who would not need new jobs because they were retired and financially comfortable, could bring their jobs with them, or could create their own jobs. However, today, many rural counties, and probably the small towns within them, are sharing in the relatively low unemployment rates, under 5%, that are to be found across the nation. Do small towns in these counties then still need to enhance the earning power of their residents? Does my White Paper’s analysis on this point still stand or need revision?
A major thrust of my argument in the White Paper was that smaller communities should not focus their economic development efforts on chasing after employers who might bring lots new jobs to the communities because they are hard to recruit and relatively few of their residents would get the jobs (most would go to outsiders). Instead, I strongly suggested that primary strategic focus should instead be placed on their resident “contingent entrepreneurs” who are in relatively insecure employment situations and might constitute 30% to 40% of their workforces. The strategic approach I suggested was in essence an attempt to retain and expand these micro businesses. However, the findings of a Bureau of Labor Statistics (BLS) report released in June of 2018 suggest that my estimate of “contingent entrepreneurs” was far too high. Again, does my White Paper’s analysis on this point still stand or need revision?
County Unemployment Rates: A Look at Wisconsin, New York, and South Dakota
Low county unemployment rates came to my attention as I was going over some data about a rural small town in WI. Looking at five distinct years of unemployment data for its county (Grant County, see table), except for the time around the Great Recession in 2010, its unemployment rate was 4.3% or lower, and its rate in April of 2018 was just 2.4%. That was even lower than its 2.9% rate back in 2000. Economists have generally accepted unemployment rates around 5% as normal (2). According to that benchmark, Grant County’s unemployment rates have usually been normal or even lower than normal.
This question then arose: is Grant County an outlier or are rural counties in WI generally experiencing relatively low unemployment rates?
Using a list of WI’s rural and urban counties, I looked at their unemployment rates in April of 2018 (see above table). Yes, the average 3.6% rate among the 46 rural counties is higher than the 3.3% average for all 72 counties and the average 2.7% rate for the 26 urban counties, but the really important point is that the rate for the rural counties was just 3.6%. Moreover, the median unemployment rate for the rural counties was 3.25%, which means that 50% of these counties had rates lower than 3.25%.
Then the question for me became: Is the situation in Wisconsin an outlier? Given time and resource constraints, I decided to look at the counties in New York and South Dakota, two states quite different in character from WI and from each other. NY has an economy dominated by a huge metropolitan area around NYC. Its upstate manufacturing and agricultural industries (e.g., milk) were facing problems long before the advent of the Great Recession. The state also has many sizeable cities besides NYC such as Buffalo, Rochester, Syracuse, Albany, Schenectady, Utica, Troy and Binghamton. Many are doing poorly. For instance, Syracuse has the 13th highest poverty rate among cities in the US. South Dakota is more sparsely populated, less industrialized and more rural that NY or WI.
The average unemployment rate for NY’s 27 rural counties, 5.9%, is higher than the average for all of the state’s counties, 4.6%, and for its urban counties, 3.6%. It also is 63% higher than the rate for WI’s rural counties. However, it is just 0.9% above the 5% benchmark for normalcy. The unemployment rate for SD’s rural counties was 4.2%, below the 5% benchmark and not that much above the 3.9% rate of the state’s urban districts.
The results from these three states suggest that the lack of jobs is not currently a major economic problem for rural areas in many states.
What, then, are the major economic problems in these counties? One is nominal population growth. As a recent study from the Pew Research Center stated: “…rural counties have made only minimal (population) gains since 2000 as the number of people leaving for urban or suburban areas has outpaced the number moving in.” Also, its survey found that rural residents were less likely to want to move to a new community and more likely to live near a family member.(3).
Another can be seen by looking, again at Grant County. Although Pew found its population had grown about 1% between 2000 and 2016, a recent study by the National Low Income Housing Coalition reported that an hourly wage of about $13.25 is required in that county to afford renting a 2-bedroom apartment at a Fair Market Rate, while the estimated average hourly wage of renters is only about $9.68 (4). That means that 26.9% of the Fair Market Rent is unaffordable for the average renters. In turn, that underscores another important point that is part of the conventional wisdom among economic development experts: rural areas need more than just jobs, they need well-paying jobs, one that provide at least living wages. A factor that adds to the issue’s complexity is that that living wages are not defined just by market forces, but also by the characteristics of the households involved. The table below shows what a living wage would be for various types of households in Grant County (5). What also pops out from that table is just how much more income households with children require.
This table is From the Out of Reach 2018 report
It seems that rural residents are willing to cope with a high degree of financial stress to stay in a rural area and close to their families. For some, that stress or perhaps the fear of that stress, reaches the point where they decide to leave.
My White Paper addressed the adequately paying jobs issue in a number of ways. It saw the creation of Small Town Entrepreneurial Environments (STEEs) as a way to:
Help contingent entrepreneurs to find more and better paying work opportunities or assignments in local and larger market areas and to then help prepare these workers to win and successfully complete them.
Stimulate and enable local retailers to implement an omni-channel marketing strategy that can penetrate larger market areas.
Stimulate entrepreneurs with no employees to not only increase their revenues, but also expand and hire workers.
Help local residents identify remote work opportunities and, if they need it, to steer them to the types of training those job opportunities required.
Create an attractive entrepreneurial environment that could attract more capable contingent entrepreneurs and small business operators who prefer living in small towns with high quality of life characteristics, but now reside in urban or suburban locations.
STEEs can still usefully perform these needed functions even when local county unemployment rates are relatively low, both historically or compared to urban counties. Though more people may be employed, many of those with jobs may need and want help to find better paying employment.
The strategy of recruiting firms that will bring lots of jobs to small rural towns does not mean either that a) substantial numbers of those jobs will go to local residents or b) that those jobs will be well-paying, as many small towns have learned from the Walmart and Amazon distribution centers that opened in them. Indeed, many of the firms that seek rural locations do so because they are looking for lower labor costs.
So far, nationally, our resurgent economy has substantially reduced unemployment, but to date it has not significantly increased the incomes of many of our households, especially those with wage earners in non-supervisory positions or in rural areas. Until that does happen, STEEs can be of considerable value.
It seems to me, then, that relatively low to normal unemployment rates in rural counties do not diminish the relevancy or the need for the kind of strategic approach I outlined in my White Paper.
Also, in many states, such as WI, their rural economies are tied to both agriculture and manufacturing. Manufacturing, which tends to be cyclical, has been doing well in recent years. An eventual cyclical downturn or increased robotization may again increase rural unemployment, again worsening rural economic conditions.
The Number of Contingent Entrepreneurs and Their Importance.
At the heart of the strategic approach I argued for in my White Paper were the residents of smaller towns who were, in the BLS’s vocabulary, engaged in contingent and alternative employment arrangements and whom I labeled contingent entrepreneurs. The bullet points below present the reasons why I thought they were so strategically important:
“In these small towns, increasing portions of their workforces are contingent/non-employer business operators. This is part of a larger national trend: the growth of contingent workers, who now account for 30%- 40% of our national workforce. How will they be helped by the attraction of a large employer to their town? Or would the money spent on attracting the large employer have larger local impacts if it were spent instead on them?”
“There are a number of definitions of contingent workers and estimates of their number consequently vary between 30% and 40% of our nation’s workforce. One definition is: ‘Contingent workers are defined as freelancers, independent contractors, consultants, or other outsourced and non- permanent workers who are hired on a per-project basis’. Whether nonemployer businesses are included is not clear for some definitions, while they seem to be either explicitly included in other definitions or implied in still others. In any case, they are perhaps best thought of as entrepreneurs operating micro-businesses – and perhaps we should be calling them contingent entrepreneurs because it is a more fitting name.”
“I would argue that, strategically, these contingent entrepreneurs are extremely important in our smaller communities. They represent a large portion, possibly 30% to 40%, of the residential workforce. Contingent entrepreneurs usually include those in both blue and white- collar occupations. The number of resident contingent entrepreneurs will greatly outnumber the number of jobs that any big employer lured to the town is likely to provide to local residents – or even those attracted to the region.”
“Some contingent entrepreneurs are doing well, while others are doing poorly. If a small town’s resident contingent entrepreneurs are doing poorly, then that town’s economy will very probably also be suffering, even if a big employer has also been lured into the community. Flailing contingents are more likely to need financial assistance from public and nonprofit sources. They are also more likely to move to other climes that offer better employment opportunities. On the other hand, if the town’s contingent workforce is prospering, then the town’s residential units are likely to be occupied and improved, its shops and eateries busy and its playing fields and cinemas filled. The contingents may also grow and develop start-ups that do employ workers.”
My reporting that these contingent entrepreneurs may account for 30% to 40% of the local workforce was based on these numbers being presented in numerous reputable publications since 2010. For example:
In 2010, the Intuit 2020 Report stated that: “Today, roughly 25-30 percent of the U.S. workforce is contingent, and more than 80 percent of large corporations plan to substantially increase their use of a flexible workforce in coming years” (6).
In 2015, the U.S. Government Accountability Office (GAO), responding to Sen. Kirsten Gillibrand, looked into the contingent workforce and its size, characteristics, earnings, and benefits. It found that: ”The size of the contingent workforce can range from less than 5 percent to more than a third of the total employed labor force, depending on widely-varying definitions of contingent work” (7).
An article in Quartz in 2017 cited a 2014 survey done for the Freelancers Union that found that “there are 53 million people doing freelance work in the US – 34% of the national workforce” (8).
As can be seen in the above table, the recently published BLS study results indicate that those engaged in contingent and alternative employment arrangements only account for between 11.4% to 11.9% of our national workforce. The difference between 11% and 30% to 40% is obviously very significant numerically. But, is it significant analytically or from a strategic viewpoint?
First, let me acknowledge my respect and admiration for the BLS’s surveys as I have stated publicly on several previous occasions. However, the GAO’s 2015 report made a very critical point that must be kept in mind when considering the BLS’s findings: estimates of contingent workers and those in alternative employment arrangements differ because of differences in how those workers are defined and the data sets that are used to study them. It may be claimed that the BLS’s definitions are particularly stringent and therefore limiting. For example, one of the analyses in the GAO report estimates that 16.2% of the workforce are “standard part-time workers” and part of the contingent workforce. These workers are not included in the BLS estimates. Moreover, the BLS only looked at primary jobs, so its sample does not include second jobs, be they fulltime or part-time. The latter would exclude, for example:
The arts work of many artists who need a fulltime non-arts job to support themselves and their families, but whose artistic activities constitute part-time jobs and what they want to do fulltime. Or the person who has a fulltime job as a professional planner, but part-time employment as a real estate developer. Or a fulltime university professor who also owns and manages 10 rental apartments.
Workers whose fulltime jobs cannot cover their household’s financial needs and who also have one or more part-time jobs to fill the gap.
Lastly, BLS excluded jobs associated with the gig economy e.g., those with Uber, Lyft, Taskrabbit, AirBNB, etc. from their survey.
In my judgement the BLS estimates should be taken as a very solid minimum estimate of the contingent and alternative arrangements workforce, with the exact number being treated as not knowable at this point in time because of a lack of consensus about how the subject group should be defined. Moreover, I would argue that the minimal BLS numbers are sufficiently large to merit considerable strategic consideration – and that, not the “true” number of contingents, is the critical question. My White Paper needs to be amended to include these points and to somewhat deemphasize the estimates of 30% to 40%. Nevertheless, the critiques of the BLS’s definitions of contingent and alternative work arrangements that followed its recent report combined with the prior research findings produced by very reputable investigators strongly hint that their true number of these workers may well be as high as 30% or so.
The recent BLS report also sparked a debate about the so-called gig economy and the impacts of firms like Uber and Lyft. However, the argument in my White Paper was quite independent of any analysis of, or advocacy for, a gig economy. My concern was: rather than chasing corporations that supposedly will provide lots of jobs, what assets can small towns best leverage to increase the earnings power of local residents? The folks that fell into my “contingent entrepreneur” category had two attributes that might be leveraged:
Many of them were indeed entrepreneurs, whether or not they were incorporated or working fulltime. They incurred considerable risk and had to compete for and win opportunities to earn money on a relatively recurrent basis. If an effective entrepreneurial environment (a STEE) could be built up around them, they might become more successful financially and able to compete in larger market areas. They might also create start-ups that would hire employees. My concern was about their retention and growth: how they could be retained in their communities and how they could earn higher incomes.
Many of them are vulnerable, with low incomes, no benefits and unhappy with their uncertain contingent employment situations. As the table below shows – using BLS data – they prefer traditional jobs. Lower unemployment rates may mean that more of these workers have found steady, more secure fulltime jobs, though their wages may not be at desired levels. The strong information brokerage and networking functions of an effective STEE would be likely to at least help some others to find fulltime and possibly better paying jobs. Some of those jobs might be remote ones.
The table below presents data for a town in the Midwest with population of about 3,900 that is located in a designated rural county. Let’s see how these data can help answer two questions:
Are there contingent entrepreneurs to warrant a program to develop a STEE in this community’s downtown?
Are there enough of them to use in marketing program to recruit more contingent entrepreneurs to live and work in this community?
To help answer the first question, let’s also consider the fact, mentioned in my White Paper, that relatively large firms moving into this community are most likely to average about 50 new job opportunities and the vast majority of them will not go to local residents. The table below shows how many residents of Town X would get jobs at various capture rates. Which is more likely to serve the needs of Town X’s residents a) a program to help its contingent entrepreneurs become more successful or b) a recruitment program aimed at bringing in more employers who can provide on average 50 jobs?
Extrapolating from the BLS data, in the above table on Town X, I conservatively estimate that its contingent entrepreneurs number between 235 to 245 of its residents. Using On-the -Map and other data from the Census Bureau, the table presents an estimate of 80 people with fulltime jobs who work at home and 74 residents who are fulltime self-employed but not incorporated. About seven of those working at home may have remote jobs. Most of these folks are likely to quickly learn about a STEE creation program. How many would then use it now cannot be estimated. Nor can how many will benefit from it. However, activities such as social networking events at local bars or restaurants and distributing information about online freelancer job marts and remote job marts can be done with relative ease and at relatively low-cost.
The chasing companies with jobs strategy has the following advantages:
Possible increased tax revenues
Possible new jobs for residents, with their number being uncertain and may be zero.
The disadvantages are far more numerous:
The odds of a small town recruiting such a job-rich company are relatively low.
The cost of an effective program is likely to be significant and its successes, if any, will probably take a good deal of time to achieve.
Local residents are unlikely to either know or “feel” the recruitment program unless firms are attracted, and new jobs are offered.
In Town X, according to On the Map data, 29% of those who work in that town also live there. If it attracts one firm that brings 50 new jobs, about 15 town residents probably will get them. For more residents to benefit more firms with jobs must be recruited. If three firms were recruited – quite an achievement for a small town — then about 45 residents might benefit.
A significant probability that the jobs offered will not be well-paying.
The town may have to offer incentives to the new firm(s) in the form of tax reductions, cheap land or infrastructure improvements that adversely impact on municipal finances.
Possible traffic and environmental problems.
There is no certainty of success for either of these programs. Local leaders will have to decide and take a chance based on “the best available information. However, one might argue that communities such as Town X should first try the STEE program because it has the potential for benefiting many more residents and then, if that program fails to meet its goals, to switch to a program aimed at helping the existing employers in town to grow. If local employers are few and/or weak, then the recruitment of outside companies that bring in some more jobs for residents may make sense.
The 80 people in Town X who work at home are enough to help develop a quality of life recruitment program aimed at skilled people who will either bring their jobs with them or create their jobs or create new companies that will have employees. There are enough to populate meeting places and events so that a STEE would have a real tangible presence. Their public endorsements of the quality of life in Town X as well as the benefits of the STEE can be strong marketing tools. Their meetings with prospects and becoming “buddies” with those newly arrived also can be very powerful recruitment tools.
There is broad consensus among economic development professionals that retention and expansion is the most cost effective meta strategy. The strategic approach outlined in my White Paper essentially applies it to the micro businesses of a small town’s contingent entrepreneurs. David Carlson, the administrator of the city of Lancaster, WI, argues that, viewed as a collective group, they are analogous to being the town’s largest employer. He then asks: “How much time would you spend working with them to keep them a growing business?”
The above link will take you to the article I have just completed on this subject. It focuses on smaller and rural communities with populations under 35,000. However, much of the analysis is also applicable to many suburban communities and even some urban neighborhoods.
Since 2010, I’ve been trying to figure out a viable approach to stimulating meaningful economic development in our smaller communities that:
— Considers current realities
— Leverages likely local assets and
— Does not threaten the scale and lifestyles that make these communities attractive to close to 70 million Americans.
This is a major research paper — 32 pages long — that brings together my work on Central Social Districts, quality of life residential and business recruitment, contingent workers, and small business e-commerce capabilities.
It is a very curmudgeonly article. While I hope it genuinely and productively explores new ground, some readers might find it somewhat contentious.
The article has lots of illustrations, but I still felt it was too long for either a newsletter or blog format.
I hope you will find it informative, useful and interesting.