Re-Shaping Economic Development

According to a recent article in the Fourth Economy, many traditional approaches and methods for economic development are failing to keep up with the changing nature of job creation and investment in our communities. They highlight four observations about new trends re-shaping economic development models.

1.     The Rise of “Solopreneurs”

A “solopreneur” is an entrepreneur who works alone, “solo,” to run their business single-handedly. They might have contractors for hire, still maintain full responsibility for the running their business.  Almost 17 million Americans are now “solopreneurs,” 900,000 more than in 2011, according to the second annual “State of Independence in America” career study by MBO Partners, a firm that provides a leading business platform to help independent consultants succeed. And another 27 million U.S. adults are considering a shift to this form of work.

This trend is not new. In 2001, Daniel Pink wrote “Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live,” which said, in part:  “Beneath the radar of the political and media establishment, tens of millions of Americans have become free agents. Some — fed up with bad bosses, dysfunctional workplaces, and the false promise in instant riches — have leapt. Others — clobbered by layoffs, mergers and downturns — have been pushed. But they’ve all ended up in the same place.”

MBO loosely describes solopreneurs as adults who work at least 15 hours a week as independent contractors, consultants, freelancers or project workers. MBO also includes small-business owners who have fewer than five employees.

The rise of the individual as a business continues to gain pace as people choose to make a living performing functions for larger businesses or even other solopreneurs. These individuals most often record their earnings via the IRS 1099 process and as a result do not appear in employment or unemployment statistics. This is a challenge for many in the field of economic development as we cannot measure or help what we cannot count or see.

The Economic Modeling Specialists International (EMSI) group recently published data that illustrates that as of 2012 there are an estimated 106.6 million self-employed people in the US, a 14.4% increase from 2001. This means that nationwide average of the self-employed workforce is over 7%. In some states such as California nearly 10% of the workforce is self-employed. According to YourEconomy.org, the most recent data for Archuleta County indicates there were 649 solopreneurs—a 10.2% increase from just two years earlier.

These workers have always been contributing to the economy in some way, but the new trend is that some smart communities are actually looking to provide supports to allow these statistics to increase.

Private companies like NextSpace (based in California) see a financial opportunity to provide the solopreneurs with just-in-time services and space through a membership model. DurangoSpace, based in Durango, CO has a public-private support model to offer similar services. These programs are more flexible in the lease arrangements as compared to the traditional incubator model.  A smaller version is just being launched in Aspen Village in Pagosa Springs too.

This new movement is helping to get people that have been negatively impacted by the Great Recession get back onto the economic playing field while also allowing Millennials (also known as “Gen Y”—the generation with birth dates from the late 70’s to early 2000’s) and other self-directed people a chance to be their own boss.

The numbers offered by EMSI and others are probably a low estimate and will certainly grow as people look for new ways of working that allows for freedom, creativity and rewards based on experience and production.

2.     Economic Gardening

There is growing awareness and proliferation of economic gardening programs. Economic gardening is an entrepreneurial approach to economic development that seeks to grow the local economy from within. What differentiates economic gardening from other entrepreneurship development strategies is its focus on providing market research and high-level technical assistance to small growth-oriented companies. The focus is on providing accurate, timely and relevant information to local entrepreneurs about key areas such as their competitors, customers, markets, and industry trends. Armed with this kind of information, a small business owner can make better strategic decisions, avoid costly mistakes, and successfully grow his or her enterprise.

Dozens of communities and even many states are talking the economic gardening talk—including Colorado—and walking the walk through formal programs and support. The concept that entrepreneurs are the real community job creators has been around for some time. The Kaufman Foundation is one of the more well-known aggregators of facts and studies that prove entrepreneurs’ fundamental importance and impact.

Michigan’s Economic Development Corporation announced they have now received $8 billion in commitments for their version, called the “Pure Michigan Business Connect” initiative. This public-private partnership seeks to support the homegrown team through a host of targeted initiatives and more flexible bank lending. The Michigan effort is one of the most visible and broad, but several other states including Florida (GrowFL) and Louisiana have programs in operation.

The difficulty with economic gardening programs is that they’re usually successful in small increments rather than the big news that political leaders like to announce around economic development projects. Economic gardening programs support entrepreneurial job creation that is more often about hiring five or ten new employees.

But when viewed holistically, these entrepreneurial hires can quickly hit the thousands and then you’re getting folks excited. This is the part that Michigan leaders seem to understand and they are working hard to support the home team’s efforts to rebuild their economy.

3.     The Deal is Dead

Maybe the deal isn’t completely dead but it certainly has taken on “Zombie- like” qualities in its pursuit of eating the flesh (meaning resources) from other more meaningful economic development efforts like those mentioned previously.

Like lemmings racing towards the cliff, millions of dollars are invested by economic development groups chasing companies, and by companies chasing states into fevered competition against the other. All because an announcement of 300 new jobs resonates better with politicians than 30 announcements of 10 new jobs. This may be changing for some, but not fast enough.

This deal-driven mentality blocks what is needed to support transformative economic development. Economic development must embrace a new model that supports the key variables that are needed for future economic development. These include: quality housing, training and education, innovation, healthy communities, employment diversity and diversity in employment, and more.

Making sure that you have good locations available for a larger business expansion is an important action, but it cannot be the singular focus of your economic development efforts. Quality locations are now below the baseline of what businesses expect. Businesses tell me that the more important things they look for are:

  • Educated workforce – Can they hire a local workforce that has the basic skills, can be readily trained for the production line, and pass a drug test?
  • Talent – Are there other local firms that have decent talent and is there a higher education group that they can work with to create career tracks (management and technical) for their people?
  • Community – If they need to recruit talent where will they live and play? Are the local schools good for their kids?
  • Taxes, incentives and sweeteners – Is the community and state responsive to creating a level tax playing field or are they looking to businesses to balance the budget?

This is the new reality of we must be prepared to offer if we are going to support our community’s growth in 2013 and beyond.

4.     Jobs and Counting Jobs

New hires, unemployment rates and job availability are all good data points but are drastically overused when you think about the size and complexity of our economy.  Slowly, this focus of just counting job numbers to define the success is falling out of favor among early-adopters of fourth economy economic development. They are realizing that economic development investment must support a broader set of services for their community to be successful.

A broader and more robust set of categories and corresponding measures for the fourth economy will include:

  • Investment – are companies and individuals investing in your community?
  • Talent – do you have a pipeline of educated workers?
  • Sustainability – do you consider the triple bottom line in making investment choices?
  • Place – do people enjoy living in your community?
  • Diversity – are new people including women and minorities welcomed into and supported by your community?

We at the Pagosa Springs Community Development Corporation have embraced these evolving and leading-edge views of successful economic development.

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