Ed Morrison Purdue Center For Regional Development West Lafayette, In

Ed Morrison Purdue Center for Regional Development West Lafayette, IN December 3, 2009

MEASURING THE IMPACTS OF COMMUNITY RENEWAL INTERNATIONAL This note explores how to measure the economic impacts of Community Renewal International's model of neighborhood renewal.

Background Community Renewal International (CRI) has developed a new model for building prosperity within poor inner-city neighborhoods. This model focuses on the development of supportive networks of "intentional relationships". The model guides the development of these relationships along the critical dimensions of a healthy community. The CRI model of neighborhood transformation is closely allied to a similar approach that we have been developing at the Purdue Center for Regional Development for regional economic transformation. Our model relies on the development of open networks. We focus on five dimensions of regional transformation: 1) building brainpower with 21st-century skills; 2) translating brain power into wealth through innovation and entrepreneurship networks; 3) developing quality, connected physical spaces; 4) creating powerful regional narratives through effective storytelling; and 5) developing democratic, collaborative leadership skills. We call this approach Open Source Economic Development. To guide the development of complex projects within these open networks, we've developed a new approach to strategy, called Strategic Doing. Unlike strategic planning, which assumes you can you operate through a hierarchical organization to develop and implement strategy, Strategic Doing guides development of complex projects in open networks. These two models of economic transformation -- one developed by Community Renewal International, the other developed at the Purdue Center for Regional Development -- are closely aligned. They both represent a new generation of policy strategy based on understanding our economy as a series of networks embedded in other networks. This new perspective carries profound impacts for the study of economics, as well as public policy for

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community development, education transformation, economic development, and workforce development.1 In the past, policy strategies for community development, economic development and workforce development have focused on solving problems. Federal and state level policies have been isolated. This approach makes sense if you view the economy as a mechanical system that can be "fixed". So, not surprisingly, public policy for community and regional development is highly compartmentalized and fragmented. In the case of economic development, there are over 180 programs scattered across nine federal departments and five independent federal agencies. This complex maze of programs evolved over five decades, as the federal government attempted to solve isolated problems.2 Network-based approaches take a different view. These models see economies at the community and regional level as open networks that can be intentionally strengthened and focused. They call for a new generation of state and federal policy that is more flexible and adaptive, but no less accountable.

Measuring the impacts of Community Renewal International: A Framework CRI's approach to transforming neighborhood economies creates two broad categories of impacts: reducing social costs and increasing neighborhood wealth. Reducing social costs Neighborhood poverty creates social costs that are not borne by the residents of the neighborhood. These costs are shifted to the broader economy and we pay for them in higher taxes. In a sense, these costs represent the "social overhead" of a poor neighborhood. These costs fall into broad categories: crime and health care. Reducing the social costs of crime is easy to grasp. Reducing health care costs is less obvious. However, if CRI improves the wellness of residents in a neighborhood -- lower rates of obesity or diabetes, for example -- the effect is lower health care costs.

Beinhocker, E. D., 2006. The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics . Boston, Mass.: Harvard Business School Press 1

Mark Drabenstott, 2009. Why is Targeted Regional Economic Development Important in Today's Policy Setting. [online] Available from: http://nercrd.psu.edu/TRED/DrabenstottChapter.pdf [accessed December 3, 2009] 2

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Increasing community wealth Two factors drive the increase in neighborhood wealth: higher levels of educational attainment and new business development. The connection between higher levels of educational attainment and higher incomes is wellestablished. As we move toward a more knowledge-based economy, income levels of high school dropouts and high school graduates have been declining, while the income levels of people with postsecondary education have been increasing.

New business activity also increases the wealth of a neighborhood. Three factors drive this process. New and expanding businesses trading with customers outside the neighborhood generate income for the neighborhood. Wealth also increases within a neighborhood when neighborhood residents buy goods and services from each other. Economists call this factor the "multiplier" which measures the impact of a new dollar coming into the economy. Vibrant economies have higher multipliers. Finally, wealth is increased within the neighborhood when businesses "plug the leaks". So, for example, a larger company, by choosing a local supplier, reduces the flow of money outside the neighborhood.

Measuring the impacts of Community Renewal International: Some Specifics We can use a variety of metrics to measure CRI's impacts. Here are several: Reducing teenage • pregnancy Reducing low • birthweight babies Increasing early • childhood education Improving 3d grade • literacy •

Reducing high school dropouts

•

Increasing educational attainment

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•

Increasing business development

Reducing teenage pregnancy.-- An analysis from the National Campaign to Prevent Teen Pregnancy shows that teen childbearing (teens 19 and younger) in Louisiana cost taxpayers (federal, state, and local) at least $165 million in 2004.Of the total 2004 teen childbearing costs in Louisiana, 49% were federal costs and 51% were state and local costs. In Louisiana, in 2004, annual taxpayer costs associated with children born to teen mothers included: $31 million for public health care (Medicaid and SCHIP); $21 million for child welfare; $34 million for incarceration; and $59 million in lost tax revenue, due to decreased earnings and spending. Reducing low birthweight babies.-- Each year, about 8% of infants are born at low or very low birth weight. These infants impose higher medical care costs and suffer long-term health problems such as cerebral palsy, mental retardation, social and learning difficulties. The average cost of medical care for a premature or low birth-weight baby for its first year of life is about $49,000, according to the March of Dimes Foundation. Increasing early childhood education.-- High-quality preschool programs are emerging as a top priority for leading business groups. According to the business led Committee for Economic Development, high-quality preschool increases the long-term employment level by states by more than twice as much as traditional economic development programs. According to research by UC Davis School of Medicine, a child's inability to pay attention when they start school had the strongest negative effect on how they performed at the end of high school. Improving 3d grade literacy.-- Patterns in educational performance emerge early in a child's life. Researchers have shown that school failure can be predicted from third grade education performance. (Indeed, some states use third-grade reading scores predict long-term prison populations.) Leading-edge business groups such as the Business Council of Fairfield County, CT are focusing on improving elementary school literacy skills. Reducing high school dropouts.-- The national high school dropout rate is about 30%. That means that for every 100 students entering high school in the ninth grade, 30 will drop out by the 12th grade. High school dropouts have become economically disabled. The average annual income for a high school dropout in 2005 was $17,299, compared to $26,933 for a high school graduate, a difference of $9,634. More important, the economic prospects for high school dropouts are deteriorating rapidly. A recent analysis in Southeast Wisconsin uncovered that only 1% of the job openings available in the high-growth healthcare sector in that region are

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open to high school dropouts. 3 The Alliance for Excellent Education released this month a new analysis on reducing high school dropouts in 50 large metropolitan areas. Reducing the number of dropouts by 50% in these large metropolitan regions would generate over $4.1 billion in additional wages over the course of one year. High school dropouts are also far more likely to end up in prison. On any given day, about one in every 10 young male high school dropouts is in jail or juvenile detention, compared with one in 35 young male high school graduates Increasing educational attainment.-- CEOs for Cities is focused on increasing the "talent dividend" in cities by boosting educational attainment. Increasing the four-year college attainment rate in each of the nation’s 51 largest metropolitan areas by one percentage point would be associated with a $124 billion increase in aggregate annual personal income. So, for example, The Columbus, OH economy would gain about $1.3 billion annually if it could increase the number of adult residents with four-year college degrees by 1 percentage point, to 33.5 percent. Increasing business development.-- A number of metrics measure increases in business activity. The Initiative for a Competitive Inner City, founded in 1994 by Harvard Business School professor Michael E. Porter, promote economic prosperity in America’s inner cities through private sector engagement that leads to jobs, income and wealth creation for local residents. ICIC has identified a number of successful strategies for inner city businesses, including increasing local procurement from large institutions, such as government, educational institutions and health care systems.

Employment and Training Institute, University of Wisconsin-Milwaukee, 2009. Survey of Job Openings in the 7 Counties of Southeastern Wisconsin: Week of May 25, 2009. [Report] Available from: http://www.eti.uwm.edu/2009/RegionalJobOpenings.pdf [accessed December 3, 2009] 3

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References Advocates for Children and Youth, February 2009. Low-Birthweight Births Cost Maryland Millions. [Issue Brief] Available from: http://www.acy.org/upimages/Birth_Outcomes_Cost.pdf [accessed December 2, 2009] Alliance for Excellent Education, 2009. The High Cost of High School Dropouts: What the Nation Pays for Inadequate High Schools. [Policy Brief] Available from: http://www.all4ed.org/files/HighCost.pdf [accessed December 3, 2009] Alliance for Excellent Education, 2009. The Nation's Path to Economic Growth: The Economic Benefits of Reducing the Dropout Rate. [Issue Brief] Available from: http://www.all4ed.org/publication_material/EconMSA [accessed December 2, 2009] Arthur J. Reynolds, PhD, Judy A. Temple, PhD, Suh-Ruu Ou, PhD, Dylan L. Robertson, PhD, Joshua Mersky, MSW, James W. Topitzes, MSW, and Michael D. Niles, PhD, 2007. Effects of a Preschool and School-Age Intervention on Adult Health and Well Being: Evidence from the Chicago Longitudinal Study. In: Society for Research in Child Development, 2007, Boston, MA.. Associated Press, 2009. Preventing High School Dropouts Can Start in 4th Grade. [Online publication]. Education Week, 2 June. Available from: http://www.edweek.org/ew/articles/2009/06/01/278463usfeparentingteensdr opouts_ap.html [accessed December 2, 2009] Catherine Gewertz., 2009. Dropout Costs Priced for 50 Major U.S. Cities. [Online publication]. Education Week, 25 November. Available from: http://www.edweek.org/ew/articles/2009/11/25/13report-b1.h29.html? tkn=ZMPFLKbkCpT4r5MIfAGuvJ3VPo2KRpYGkBd7[accessed November 29, 2009] Beinhocker, E. D., 2006. The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics . Boston, Mass.: Harvard Business School Press Cortright, Joe 2008. The City Dividends: How Cities Gain by Making Small Improvements in Metropolitan Performance. [Report] Available from: http://www.ceosforcities.org/pagefiles/City_Dividends_FINAL_NewLook.pdf [accessed December 3, 2009] Committee for Economic Development, 2006. The Economic Promise of Investing in High-Quality Preschool: Using Early Education to Improve Economic Growth and the Fiscal Sustainability of States and the Nation . Page 6

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