A Tool for Growth That Benefits Everyone

In too many cases, regional economic development organizations are missing an opportunity to help make growth more inclusive.
October 24, 2017
Downtown Nashville from the Shelby Street Bridge
Downtown Nashville (Flickr/Andre Natta)
By Ryan Donahue  |  Contributor
Researcher, consultant and project analyst with the Brookings Institution's Metropolitan Policy Program
By Brad McDearman  |  Contributor
Nonresident senior fellow with the Brookings Metropolitan Policy Program

Metro areas around the nation look to Nashville as a model of economic development done well. Its output grew by nearly 25 percent from 2010 to 2015, transforming its downtown and bringing with it an unprecedented boom in high-wage jobs in the professional-services and health-care industries. Yet over the same period, earnings for the average worker fell by nearly 2 percent -- an even greater decrease than the national average. Half of the region's families still make less than the $50,000 a year required to be self-sufficient.

Different versions of this story are playing out in every region, from transitioning industrial centers like Indianapolis to knowledge capitals like San Diego. Bridging these growing gaps by making economic growth more inclusive is the defining economic and social challenge facing cities. Yet despite being the most influential voices and agenda-setters on economic issues in many regions, regional economic development organizations (EDOs) have generally avoided wading into this issue.

This is a major missed opportunity. Regional EDOs have a unique and potentially important role to play in inclusive growth. Many of the drivers of economic exclusion are regional, so strategies will need to be coordinated by an organization that can foster collaboration across jurisdictions. Strategies will also require support from businesses and changes in business practices, from hiring to site selection to training. EDOs have the credibility needed to convene and influence the business community.

We recently completed a collaborative project with the EDOs from Indianapolis, Nashville and San Diego designed to understand what's holding the organizations back and outline how they can reshape their practices to prioritize inclusive growth.

The premise of the project, the Inclusive Economic Development Lab, was that EDOs want to engage (and are being pushed to do so by some of their most influential stakeholders) but don't know how. The reason for this is that they lack a "business case" that illustrates the extent of exclusion in the local economy and lays out the argument for why an organization traditionally responsible for generating growth -- a hard-enough job in its own right -- should begin focusing on who benefits from growth. This business case is not a substitute for the urgent moral case to act; it's a complementary effort by EDOs to convince their members that inclusion is itself a growth engine and that the cost of inaction far outweighs the cost of action.

There's no easy formula for building such a case, but these are the five key questions that the EDOs in the Lab grappled with:

What is our function? To stay focused and set realistic expectations among partners, an EDO must begin with a confident understanding of its core capabilities and purpose. EDOs have to respond to the growing number of partners and funders that see inclusion as a clear priority, but they are under equal pressure to not dilute their current growth-oriented mission. Thus the challenge for an EDO is to zero in on areas where its existing tools can meaningfully affect inclusion. It must explore openly, but in doing so risks being pulled in many directions by an unfamiliar set of new actors and issues.

Who is excluded from the benefits of growth? Tackling this seemingly simple question was one of the Lab's more complicated and eye-opening exercises. Excluded populations range from historically marginalized minorities to the anxiously-employed middle class, from the homeless to professionals who can't afford increasingly expensive housing. To inspire action, the business case must underscore the breadth of exclusion. To support effective strategies, however, it must not obscure the different situations and needs of these sub-groups.

What barriers have led to their exclusion? For an EDO to figure out how to apply its tools, it must understand what barriers prevent each of these populations from meaningfully participating in the economy. These include dynamism barriers, defined as the failure of the economy to generate enough good jobs; skill barriers, or the failure of firms or schools to equip people with needed skills; and access barriers, or the inability of people to reach jobs due to lack of housing near employers or inadequate transit.

What is the cost of exclusion? If business and local leaders are to act, they must be convinced that exclusion is costly to them and that dealing with it is smart business and economic strategy. One example: Firms in San Diego reacted strongly when the skills barriers facing the fast-growing Hispanic population were translated into the direct, quantifiable costs of a looming shortage of skilled workers. Other compelling costs include forgone economic growth, rising tax burdens and the risk of civil unrest.

What is our role? Ultimately, the business case for inclusive growth should enable an EDO to re-shape its work, but most will need to figure out how to do so in the absence of new resources, without neglecting existing responsibilities, and by complementing the work of partners. This starts with an important convening and collaboration role to maintain awareness and inspire a collective regional response. There are also countless ways to engage, including direct intervention with employers and on policy, especially related to education, transit and housing.

More experimentation will be needed before we understand exactly where EDOs can be most effective in promoting growth that benefits communities and their residents more broadly. By starting with a clear and compelling business case, EDOs can ensure that their organizations and their partners remain committed through the inevitable ups and downs of that experimentation.