Michael Schuman's Scorecard for a Local Community's Economy
How Does Your Community Measure Up?
Recently, my friend Michael Shuman, publisher of the Main Street Journal, posted an article as a teaser for a webinar he did with the American Independent Business Alliance (AMIBA), hosted by our friend and colleague Jen Risley.
The article stopped me in my tracks. It was a scorecard for communities’ economic health. The insights were simultaneously profound and practical. A local community economic director could reasonably be expected to gather the hard data in a few days. Entrepreneurs and community leaders can readily see the data in their lived experience.
With permission, we’re replaying the webinar above and on SuperCrowd.tv, our new Roku and Amazon Fire TV app. We invite you to enjoy the experience of watching Michael’s presentation on the biggest screen in your home via SuperCrowd.tv.
Michael teased the event with the summary below.
How We Should Measure Economic Progress
by Michael Shuman
Most communities measure economic progress by looking at regional gross domestic product (GDP), population growth, or successful corporate attractions. We know that these measures are misleading and wrong, but what should be our alternatives? How should those of us promoting stronger local economies measure success? Next Thursday, June 11, at 1 pm ET, I’m leading a webinar sponsored by the American Independent Business Alliance (AMIBA) to answer this question. I’ll also summarize our report card on the local economy movement, which we released in late April.
Here’s a sneak peek of the twelve measures I’ll be recommending:
(1) Median Income – Median income shows how much money people living at the 50% percentile make. It’s better than average income or GDP per capita, because a tiny number of gazillionaires cannot really artificially inflate this number. If median income is rising, then all the boats in your economy are probably rising.
(2) Inequality — Economists have a specific way of measuring the local economy called the Gini Coefficient. The higher that number, the greater the inequality. You should see whether, over the last five to ten years, your Gini number is shrinking and your community is moving toward greater social equality.
(3) Local Business Jobs – Look at the number of jobs in private firms (not enterprises) with fewer than 500 employees, and be sure to add public employees and self-employed people. These firms and institutions are 99% locally owned. The higher the number of these employees—and the higher the percentage they collectively comprise of the local workforce—the stronger your economy will be.
(4) Degree of Self-Reliance – The more diverse your economy, the more likely it will retain local flows of purchasing and investment dollars. One simple way of measuring your self-reliance is to compare your economy to the U.S. economy as a whole. Why? Because the U.S. economy is actually relatively self-reliant, and its consumption patterns from place to place are quite similar. If the percentage of your workforce in, say, construction is smaller than the U.S. as a whole, chances are good you are importing work from construction firms outside your community. The smaller your import dependencies, the stronger your economy.
(5) Survival Rate of Small Business – Look at the number of the smallest businesses in your economy—say, those with under 50 employees. If that number is steadily increasing, then you know that the entrepreneurial ecosystem—including finance, technical assistance, courses, you name it—is performing well.
(6) Number of B-Corps and Benefit Corps – The B-Corp label is the best measuring system for businesses with exceptional behavior benefiting not just investors but workers, community members, and ecosystems. There are now more than 2,000 certified B-Corps in the United States. Thousands more have taken advantage of a less stringent law that most states have set up called “benefit corporations.” The more of these exemplary performers in your economy, the more other local companies will be inspired to improve their own social performance.
(7) Business Network Size – Local business networks, like Local First Arizona, can help improve the competitiveness of member firms through joint marketing, joint purchasing, joint contracting, and joint advocacy. The more dues-paying business members of your network (Arizona has nearly 3,000), the more powerful this collaboration can be. A growing membership is evidence that your efforts are paying off.
(8) Non-Grant Support of Business Networks – Fifteen years ago, the U.S. had hundreds of local business networks. Most disappeared because they couldn’t develop revenue models beyond fundraising from foundations or government agencies. A business network should strive to provide useful services for its members to justify regular dues. Better still, deploy a business model for your network (like running a buy-local phone app) to diversify your cash flow. (My book, The Local Economy Solution, describes more than two-dozen such business models.) Revenue streams that are not dependent on the whims of grantmakers can ensure the long-term success of your network.
(9) Public Procurement – What percentage of your local government’s purchasing is going to local businesses? The higher that percentage, the stronger the multiplier effect on income, wealth, and jobs. The City of Preston, England, for example, increased its local procurement from 5% to over 18%, injected tens of millions of new pounds annually into the local economy, and was able to provide 4,000 new living-wage jobs.
(10) Crowdfunding Investments – To what extent are businesses in your community raising capital directly from community members through investment crowdfunding? Count the number of such raises in your community each year, and the money flowing into them. The bigger these numbers, the more local investment is taking hold. Give your community extra credit if you also have a local investment fund supporting local businesses.
(11) Corporate Attractions – Ultimately, a local economy can benefit from a supportive economic development department. And there is no surer sign of indifference or hostility to local businesses than awarding huge incentives (grants, tax breaks, capital improvements) to large, nonlocal companies. The less of this activity, the more likely your economic development establishment will be laser-focused on the health and expansion of local small businesses.
(12) Brain Drain – To what extent are young people, especially your most talented, sticking around after high school graduation? Dead-end communities will steadily bleed away young people. Creative, diverse, dynamic communities are those where young people will stay (at least if there’s affordable housing).
So how do you measure these indicators? Come to our June 11 webinar, and I’ll show you ways to capture this data easily and inexpensively. Again, you can register for free here. See you there! (And enjoy our latest listings of local investment opportunities below.)
Max-Impact Members
(We’re grateful for every one of these community champions who make this work possible.)
Brian Christie, Brainsy | Cameron Neil, Lend For Good | Carol Fineagan, Independent Consultant | Hiten Sonpal, RISE Robotics | John Berlet, CORE Tax Deeds, LLC. | Justin Starbird, The Aebli Group | Lory Moore, Lory Moore Law | Marcia Brinton, High Desert Gear | Mark Grimes, Networked Enterprise Development | Matthew Mead, Hempitecture | Michael Pratt, Qnetic | Mike Babbit | Coledger Solutions | Mike Green, Envirosult | Nick Degnan, Unlimit Ventures | Dr. Nicole Paulk, Siren Biotechnology | Paul Lovejoy, Stakeholder Enterprise | Pearl Wright, Global Changemaker | Scott Thorpe, Philanthropist | Sharon Samjitsingh, Health Care Originals | Add Your Name Here
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