Does Equitable Economic Development Require a New Set of Tools?
Cities throughout the nation are reckoning with the reality that the last decade’s streak of urban job growth - and in many cases, population growth - has not contributed to a reduction in longstanding racial wealth disparities. It is clear that the old adage – “A rising tide lift all boats” simply has not come to bare. Despite steady growth in most cities, racial disparities have not been reduced, and in the majority of cities, have actually worsened. According to Manuel Pastor, a USC sociology professor and the director of the Equity Research Institute, in all of the 150 largest metropolitan areas, white workers earn higher median wages than workers of color. And in 65 of the 150 metropolitan areas, the gap in the median hourly wage between white workers and workers of color has widened since 2000 by at least $1 an hour.”[i]
For economic development professionals, this realization begs many questions, including existential questions about the traditional strategies and tools that have been utilized for years. It is clear that much of what we are doing isn’t working, so what will?
Traditional economic development has measured progress through metrics such as job growth, population increase, gross domestic product, and visitation revenue, to name a few. Other important indicators include median wage, unemployment rate, and the poverty rate. It isn’t that these metrics aren’t the right metrics to track, but if we only look at these metrics on a citywide level, then we’re only monitoring whether the tide is lifting, and we’re not looking to see what’s happening with the various boats. Moving forward, we have to disaggregate the data and concentrate on reducing the racial disparities.
In 2019, Mayor Kenney announced the City of Philadelphia’s inclusive growth strategy. One of the core differences with this strategy were the six key performance indicators (KPIs) selected:
Close the gap between Philadelphia’s median household income and the nationwide median household income.
Continue outpacing the nationwide job growth rate.
Close the gap in the unemployment rate between Black, Hispanic, and Asian residents and White residents.
Close the gap in median income between Black, Hispanic, and Asian residents and White residents.
Close the gap in educational attainment between Black, Hispanic, and Asian residents and White residents.
Decrease the number of people in poverty by 100,000.
While the first two KPIs were strictly related to Philadelphia keeping up with the national average for wage and jobs (something the city has struggled with for years), the remaining four all focused on racial equity. The report states, “Racial equity reflects a just and fair society in which all people can participate, prosper, and reach their full potential; and if racial equity is achieved, racial disparities in health, education, wealth, and other areas would not exist.”[ii] Instead of the focus being on measuring how fast the tide rises, four out of six indicators, focus on moving the boats that most need help getting to the crest. This is a very different focus from traditional economic development KPIs and it stands to reason that different tools and strategies will be needed to achieve these goals.
Economic Development practitioners are accustomed to having a relatively standard toolbox to encourage economic growth: economic incentives, industry cluster strategies, startup incubators and accelerators, small business lending and technical assistance programs, business improvement districts and commercial corridor initiatives, to name some of the most common. Likewise, workforce development programs have focused on placing dislocated workers into positions with high vacancy rates, often providing “soft skills” to position individuals for future career success. Unfortunately, many of these jobs do not have high earning potential, therefore even during the years when job growth was most robust, many new jobs created were low-wage jobs or inversely they might have been high wage/ high skills jobs with very few middle skills, life-sustaining jobs to create economic mobility.
Moving forward, I would argue that the tools that we have normally turned to are not obsolete, but we have to apply them differently. If governments are going to offer a company a tax break or cash incentive, it is imperative that they pass the benefit on through employment of residents who have traditionally faced barriers or include a real commitment to racial equity and community wealth building. Providing tax credits to businesses for paying high wages to new residents will not move the needle on racial equity. In fact, there are documented high quality workforce programs that have helped companies solve retention challenges, increase diversity and improve their financial bottom line, while also creating much needed opportunities for job-seekers. More such partnerships must be sought out, encouraged and established.
Likewise, cities should continue to prioritize industry cluster strategies in order to build the infrastructure and talent pipelines to ensure their future competitiveness, but with equity as a core focus. For example, cell and gene therapy has been identified as a cluster for Philadelphia’s future growth and in 2019, a study commissioned by the PIDC and the Philadelphia Department of Commerce, found that lab space was in high demand and low supply.[iii] Physical lab space is certainly critical, but equally, if not more crucial, is the need to ensure Philadelphia’s residents, from K-12 to adults, are trained in the skills that will be needed to fill the jobs that will emerge in this growing field. The Greater Philadelphia Chamber of Commerce and Philadelphia Works, recognizing the imperative to ensure the jobs created in this sector are more inclusive and that opportunities for advancement are a priority, recently launched a Life Sciences Industry Partnership to develop strategies to diversify the sector’s talent pipeline. As cities like Philadelphia identify clusters, they must be intentional about selecting them through a racial equity lens. Simply focusing on growing a particular industry, especially those that are dominated by graduate and four-year degrees, without implementing robust skills programs to create new career paths and upward mobility for lower-income residents, will only exacerbate the racial wealth divide.
In future blogs, I will dig deeper on each of these tools and how to apply them more equitably, but for now, I recommend practitioners check the following boxes when determining how to apply standard tools and strategies:
1. If the tool is going to lead to more job creation, ensure it is applied in such a way that directly incentivizes hiring of Black and brown residents and populations that have historically faced barriers to employment.
2. If the tool is going to make the City more competitive, ensure that it doesn’t just attract new high-skilled workers to the City, but also creates economic mobility for existing residents.
3. If the tool is focused on building skills, ensure the focus is on preparing people for jobs that lead to living wage jobs and career pathways, not low-wage jobs.
Economic Development experts play a key role in predicting the future trends that will contribute to economic growth in cities. It is clear that cities will need to continue to adapt to the changes brought on by automation, the digital economy and environmental sustainability goals. All of these changes have the potential of being a catalyst for creating economic opportunities for those who need it most. However, if policymakers and practitioners do not intentionally focus on leveraging such changes to create opportunity, the new economy could easily widen the wealth gap further. After years of inequitable growth, city leaders must sharpen their focus on ensuring racial equity above all else. If the adage “rising tides raise all boats” hasn’t worked out for us, let’s swap out for this related, but much more apropos saying: “Equity does not mean everyone gets the same; it means everyone gets what they need.”[iv]
References:
[i] Brownstein, Ronald. “America’s Cities Are Staggeringly Unequal: New data show how in every major metropolitan area, massive gaps still separate white people and people of color.” The Atlantic, July 23, 2020. https://www.theatlantic.com/politics/archive/2020/07/us-cities-massive-wealth-and-education-gaps/614491/
[ii] “Growing with Equity: Philadelphia’s Vision for Inclusive Growth.” https://www.phila.gov/media/20190502112652/Growing-With-Equity.pdf
[iii] Real Estate Solutions and CBRE. “Market Assessment of Life Sciences Laboratory Space in Philadelphia.” November 2019. https://www.pidcphila.com/images/uploads/resource_library/PIDC_Lab_Space_Study_RESGroup_FINAL_VERSION_110819.pdf
[iv] Adaptation of quote by Rick Riordan, author of “The Red Pyramid.” (Original quote: “Fairness does not mean everyone gets the same. Fairness means everyone gets what they need.”)