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B R I D G E S | FA L L 2 0 1 9 https://www.stlouisfed.org/publications/bridges/fall-2019/here-comes-the-neighborhood Here Comes the Neighborhood: Breathing New Life into the Inner City, One Mortgage at a Time Glenn Burleigh , Clayton Evans , Jonathan Ferry , Michelle Witthaus A Credit Crisis The flow of capital and credit is to an economy what blood is to the body. If the flow of credit gets cut off, it will decay much like an arm or leg will turn gangrenous without proper circulation. For decades, neighborhoods in parts of St. Louis, particularly in North St. Louis City, have been cut off from the flow of credit, and this has resulted in tremendous disinvestment. Neighborhoods have witnessed business and factory relocations, school closings, residents moving away and properties falling into disrepair as a result of a lack of access to credit. This lack of credit can be traced back to a pre-civil rights era federal government policy, commonly known as redlining. This policy effectively acted as a tourniquet for credit, restricting the flow of funds into certain geographies deemed to be a poor financial risk. Most of these “poor risk” areas happened to also be areas of majority minority populations. The impact of this policy in St. Louis is evident when you drive through many neighborhoods north of Delmar Boulevard. Red lines on a map once divided these areas from investable areas, and to this day the “Delmar Divide,” which serves as North City’s southern boundary, is a dividing line between the city’s wealthy and poor communities. Appraisals at the Forefront Mortgage lending is a critical component of credit access. Without mortgage lending, many who desire to reinvest in communities are unable. Where there is a will, people are left without a way. According to the Home Mortgage Disclosure Act data, only 4% of new home mortgages within the city of St. Louis were issued for homes north of Delmar Boulevard in 2017. This stark reality is a reminder of the deep divides our region faces. While redlining is a thing of the past, the legacy it has left in its wake is the problem of depressed property values and appraisal gaps. Put simply, mortgage lenders are restricted from lending buyers more money than the appraised value of the house they want to buy. In a healthy market, this restriction makes perfect sense. Why would a bank lend you $150,000 for a $100,000 house? But in a market that has suffered under decades of credit restriction, and subsequent asset depreciation, such a policy prevents using credit to purchase and rehabilitate properties; thus, holding down property values. A recent Brookings Institution report revealed that undervaluation of homes in communities of color is a nationwide trend that is affecting wealth accumulation for many families. To understand just how this is reflected in our region, the Metropolitan St. Louis Equal Housing and Opportunity Council (EHOC) conducted a follow up investigation in the same vein as the Brookings study. When comparing sale prices for similarsized homes in neighborhoods with similar median incomes, the investigation found that sale prices in majority black neighborhoods were often half of those in majority white neighborhoods. Based on their findings, EHOC concluded that “This represents a significant loss of household wealth for our region’s black households. It plays a role in continuing the multi-generational cycle that drives a significant portion of the ‘wealth gap’ between black and white households.” This phenomenon has now spread into suburban areas, far beyond the originally redlined neighborhoods. One thing is clear: The appraisal gap issue is detrimental to community reinvestment. With mortgage lending nearly nonexistent, potential homeowners can normally only purchase homes with cash. This prevents many potential homeowners with good credit from owning a home in disinvested communities. Current homeowners are also negatively affected by the appraisal gap, as accessing financing for home improvements is virtually impossible, thus leading to further degradation of existing housing stock. This vicious cycle of undervaluation, decreased mortgage lending, and home degradation are major contributors to the urban blight we see today. Solving the Appraisal Gap [Expand image] A new program, the Gateway Neighborhood Mortgage, promises to bring mortgage lending back to undervalued neighborhoods by providing mortgages on properties that cannot be purchased through traditional financing. The program will remove the appraisal gap barrier by providing a second mortgage to qualified borrowers to assist with purchase and renovation of homes in undervalued communities. Uniquely, the Gateway Neighborhood Mortgage makes available a 20-year fixed first mortgage. Under the program, a second mortgage is provided when the appraisal does not support the purchase and rehabilitation price of a home. The second mortgage will allow up to $75,000 over the appraised value for the purchase and renovation, thereby producing a feasible and worthwhile investment. Participating banks will offer the loan product, providing homebuyers with consistent terms and rates on an affordable mortgage. The sources for the second mortgage are comprised of funds from banks, the St. Louis Development Corporation, and private philanthropic foundations. Homebuyers will also receive homebuyer counseling and project management assistance for the home renovations. Goals of the Gateway Neighborhood Mortgage: Here are some thoughts on how CDFIs can intervene across the continuum: Improve financing options for homebuyers in undervalued neighborhoods Allow homeowners in undervalued neighborhoods to access money for improvements Increase market value by creating a lending ecosystem that reduces vacancy and stabilizes neighborhoods Make homeownership available to traditionally underserved communities The Gateway Neighborhood Mortgage is a distinct market intervention aimed at reinvigorating the housing market and yielding noticeable investment in undervalued neighborhoods. It is an intervention designed to equalize market forces until appraisal values increase and traditional mortgages are once again viable. A New Trajectory for the City As we look to the future of the St. Louis region, we know that our future depends on reinvestment in our communities and in our people. Where St. Louisans have a will, this program will now give them a way. The Gateway Neighborhood Mortgage program aims to prove that all neighborhoods are worthy of investment. Glenn Burleigh is a community engagement specialist with the Metropolitan St. Louis Equal Housing and Opportunity Council; Clayton Evans is the senior vice president and community affairs officer at Simmons Bank; Jonathan Ferry is the financial analyst and project manager with the St. Louis Development Corporation; Michelle Witthaus is a program manager at Washington University in St. Louis. ABOUT THE AUTHORS Glenn Burleigh Glenn Burleigh is a community engagement specialist with the Metropolitan St. Louis Equal Housing and Opportunity Council. Clayton Evans Clayton Evans is the senior vice president and community affairs officer at Simmons Bank. Jonathan Ferry Jonathan Ferry is the financial analyst and project manager with the St. Louis Development Corporation. Michelle Witthaus Michelle Witthaus is a program manager at Washington University in St. Louis. B R I D G E S | FA L L 2 0 1 9 https://www.stlouisfed.org/publications/bridges/fall-2019/cra-considerations-for-branch-closings CRA: An Examiner's Perspective Considerations for Branch Closings Bill Ward This article is part of a series on Community Reinvestment Act (CRA) best practices from an examiner’s perspective. Although this column focuses on CRA best practices for financial institutions, the content may provide insights for community development organizations working with financial institutions to meet credit and community development needs. As a disclaimer, this series is meant only to represent best practices; financial institutions should consider the information presented in context of the requirements or guidance from their primary regulators and their own business needs. According to a 2018 Pew Research Center study, millennials became the largest generation in the U.S. labor force in 2016.1 Correlating with the rise of millennials in the U.S. labor force is the increasingly ubiquitous presence of technology in today’s financial markets. Millennials are assumed to be more technologically savvy than prior generations and have become a key target demographic for companies, including banks. To meet their needs, many banks are transitioning from traditional banking models towards digital platforms. In transitioning to a digital focus, a bank may reduce its number of branches to concentrate its resources and maximize profitability. However, before a bank can close a branch it must follow the requirements set forth in Section 42 of the Federal Deposit Insurance Act. Among the requirements, a bank must notify its regulatory agency of its intent to close a branch while providing reasons and data supporting the decision. In addition to notifying its regulatory agency, a bank must also notify customers affected by the branch closure. Notice requirements are more restrictive on interstate banks (banks that operate in more than one state) seeking to close a branch in a low- or moderate-income (LMI) census tract. In this scenario, notices sent to customers must include the address of the bank’s regulatory agency with a statement that comments regarding the closing may be mailed along to the agency. While regulatory agencies do not have the authority to prevent an institution from closing a branch, they are required to schedule a meeting with relevant stakeholders if customer comments indicate that a branch closure would adversely affect the community. When deciding whether to close a branch, bank management may focus its analyses on its profitability. While profitability for a bank is unquestionably essential, it should not be the only factor considered. Branch closures can have negative impacts on communities, as well as a bank’s Community Reinvestment Act (CRA) rating. In terms of community development, branch closures (most notably those located in LMI areas) can have unintended negative consequences for community residents and organizations. For area residents, a branch closure may result in less access to personal banking products such as checking accounts, savings accounts, and consumer purpose loans. A branch closure may also result in less access to basic financial education and training for residents of the community. This combination could result in more reliance on nontraditional financial institutions, such as check cashing stores and payday lenders that tend to charge exorbitant fees relative to a community bank; especially in areas where bank branches are already limited. For organizations, fewer branches in LMI areas could limit interactions between a bank and the community organizations located in those areas. These limited interactions could result in missed community development opportunities for the bank and the community. Consequently, banks should consider these factors in their decision-making process, as community development performance contributes to a bank’s overall CRA rating.2 For large banks, regulatory agencies also assess a bank’s systems for delivering retail banking services with particular emphasis on the distribution of branches and the amount that were opened and closed. The primary emphasis is specifically on full-service branches, since convenient access to these locations within a community is an important factor in determining the availability of credit and non-credit services.3 While online banking has increased significantly over the last 20 years, many customers still utilize bank branches.4 Closing branches in LMI census tracts may negatively affect a bank’s service test rating to the extent that the branch closures have a negative impact on the accessibility of banking services in the community. There is no denying that banks are adapting their traditional banking models to fit the technological landscape in the industry. This increased focus has led some banks to change their branching structure in an effort to concentrate resources and maximize profitability. While profitability is certainly an important factor to consider, banks should also seriously consider the possible negative effects a branch closure could have on the development of local communities and the ratings assigned during CRA examinations. Bill Ward is a consumer affairs examiner at the Federal Reserve Bank of St. Louis. Endnotes 1. See www.pewresearch.org/fact-tank/2018/04/11/millennials-largest-generation-us-labor-force/. 2. Community development is included in a bank’s CRA rating only if the bank is evaluated as an intermediate small bank or large bank based on annually updated asset thresholds. 3. Generally, a full-service branch is one where deposits are accepted, loans are made, accounts are opened and closed, normal hours are maintained, and full-time staff are present (including on-site loan officers). 4. See www.federalreserve.gov/econres/notes/feds-notes/why-are-there-still-bank-branches-20180820.htm. Bridges | Fall 2019 https://www.stlouisfed.org/publications/bridges/fall-2019/shifting-dynamics-in-eighth-district-cities Shifting Dynamics in Eighth District Cities Ana Hernández Kent Was your city more or less populous in 2018 than in 2017? Did it become a more affordable place to live? But what about other characteristics? The St. Louis Fed’s Center for Household Financial Stability took an in-depth look at four Eighth District cities (St. Louis, Little Rock, Ark., Louisville, Ky., and Memphis, Tenn.) to explore how dynamics are shifting. Had the city, or rather, the county in which the city is located, improved from the previous year? To answer this question I used 15 metrics, including: growth in total population, median income, median rent prices, median housing prices, homeownership rates, poverty rates, food stamp take-up, unemployment rates, health insurance coverage, commute times, racial diversity, share of college graduates and high school graduates, graduates moving into the county, and income inequality.1College graduates refer to those with at least a four-year college degree. The census rates in the 2018 American Community Survey were compared to the 2017 rates. Findings are summarized in the table below. USA 2018 Total population St. Louis 2017 327,167,434 308,626 Memphis Louisville Little Rock 2018 2017 2018 2017 2018 2017 20 302,838 936,961 935,764 771,158 770,517 393,956 392 $49 Median Income $61,937 $42,270 $43,889 $50,640 $47,500 $56,145 $55,851 $53,499 Median Gross Rent (inflation adj. 2018$) $1,058 $795 $830 $923 $902 $850 $874 $851 Median House Price (inflation adj. 2018$) $229,700 Homeownership Share 66% 48.1% 48.0% 56.9% 57.0% 65.1% 63.1% 61.0% 61. Poverty Share 11.8% 18.9% 18.5% 15.1% 17.8% 11.7% 13.2% 13.7% 14 Share of Households on SNAP 11.3% 20.9% 18.2% 17.4% 16.3% 12.1% 10.6% 9.0% 10 Income Inequality (GINI) 0.48 0.50 0.51 0.52 0.51 0.47 0.49 0.50 0. Unemployment 4.9% 7.0% 6.2% 7.0% 7.9% 5.6% 5.2% 5.1% 4.3 Share without Health Insurance 8.9% 10.5% 10.4% 10.4% 12.9% 5.2% 5.4% 6.4% 6.9 Commute Times (in minutes) 27.1 24.1 25.3 22.5 22.8 22.5 22.4 20.3 21 Share FourYear Grads 30.1% 34.5% 35.5% 29.2% 28.8% 31.5% 32.2% 32.2% 31 Share High School Dropout 11.8% 11.8% 10.6% 11.3% 12.3% 9.1% 10.3% 9.8% 10 Grads Moved Into County 2.2% 4.3% 5.1% 1.3% 1.2% 1.8% 1.9% 1.5% 2.3 $8 $144,228 $154,800 $151,572 $157,700 $177,888 $182,500 $159,426 $164 SOURCE: American Community Survey 1-year estimates and author’s calculations. NOTE: Dollar values are Consumer Price Index for all Urban Consumers adjusted to 2018 values. Bold numbers indicate improvement from the prior year. Diversity (white share) 60.2% 43.6% 44.1% 35.8% 35.4% 67.5% 66.7% 52.2% 51. SOURCE: American Community Survey 1-year estimates and author’s calculations. NOTE: Dollar values are Consumer Price Index for all Urban Consumers adjusted to 2018 values. Bold numbers indicate improvement from the prior year. St. Louis City St. Louis city, a city independent from the county, improved on many measures. Even though St. Louis’ population dropped 2%, its median household income increased 3.8% after adjusting for inflation.2In this essay, dollars have been inflation adjusted to 2018 values using the Consumer Price Index for All Urban Consumers (CPI-U). In a story that parallels the national narrative, housing increases outpaced incomes. Median house prices rose 7.3% between 2017 and 2018, and median gross rent rose 4.5%. However, house price increases do not seem to have deterred potential homebuyers, as the homeownership rate remained roughly unchanged. The median income increase in St. Louis outpaced the national increase of 0.64% (this may be related to St. Louis city attracting more college graduates and lowering its unemployment rate).3ACS unemployment rate estimates tend to be higher than Current Population Survey and Local Area Unemployment Statistics unemployment estimates. The national ACS unemployment rate in 2018 was 4.9%. While the St. Louis population has decreased overall, the population of four-year college graduates increased by roughly 1,200 individuals between 2017 and 2018. Unsurprisingly, the share of adults who were college graduates also increased to 36%. An increased share of the population responded that they were college grads who had moved into the county in the past year, indicating that St. Louis may be attracting more college graduates than in the recent past. Overall, St. Louis city improved on most of the metrics and did better than a few national rates. Memphis The population in Shelby County, Tenn., (home to Memphis) remained fairly steady. Notably, even though the median house price increased by 4%, median household income fell by more than $3,100 to $47,500. Median gross rent fell slightly, suggesting that renting may be the more affordable option, relative to 2017. Homeownership rates were roughly unchanged. A greater share of individuals had incomes below the poverty line (up 2.7 percentage points); however, fewer households received food stamps (down 1.1 percentage points). Unemployment rates also increased, and fewer people had health insurance. While commute times increased slightly, they were still well below the national average. The share of adults with less than a high school education increased, while the share who were four-year college grads slightly decreased, indicating that Memphis’ adult population was less educated in 2018 than in 2017. Racial diversity decreased slightly, but the county was much more diverse than the U.S. as a whole. Overall, the city also scored less favorably than the U.S. on most measures. Louisville The population in Jefferson County, Ky., where Louisville resides, remained essentially unchanged, as did its median household income (dropping $300 after adjusting for inflation). Median rent increased by 2.9% and median house prices similarly increased by 2.6%. Stagnant wages and increased house prices were reflected in a drop in the share of homeowners, which decreased by 2 percentage points. As with Memphis, the story regarding poverty was mixed. Though a larger share of individuals had incomes below the poverty line, fewer households were on food stamps (this amount dropped below the national rate). The unemployment rate also showed slight improvements. While more residents lacked health insurance than in the previous year, Louisville’s ranking was better than the national rate. The county saw more racial diversity, as a third of the population was indicated nonwhite. The share of adults with less than a high school education increased; meanwhile, the college graduate share increased to 32.2% (adding an additional 4,600 college graduates). Unsurprisingly, the county also had increased income inequality.4The Gini coefficient measures inequality, where 0 indicates perfect equality and 1 indicates perfect inequality. The U.S. Gini coefficient was 0.48 in 2018. While Louisville’s performance weakened on many metrics from 2017, the city also performed better than the nation on more than half of the measures – housing affordability and educational attainment, in particular. Little Rock Pulaski County is home to the largest city in Arkansas – Little Rock. Just like the other counties on this list, its population decreased slightly. Little Rock’s median income also fell a sizeable 7.3%, or nearly $3,900 to $49,600. On the other hand, median house prices increased by 3.3%, while median rent decreased by 2.8%. Similar to Memphis, this suggests renting became more affordable relative to the previous year. Interestingly, the city saw an increase in homeownership rates. Indicative of increased economic hardship, the share of individuals with incomes below the poverty line increased, as did the share of households on food stamps. However, the unemployment rate decreased and more people had health insurance. Little Rock’s adult population was less educated in 2018 than in 2017. The share of adults with less than a high school education increased and the college graduate share decreased. Little Rock decreased on some measures, but it scored better than the national rate on most of these measures, including housing affordability, education and health insurance rates. Conclusion From 2017 to 2018, these four Eighth District cities improved on some measures and lost ground on others. Compared to the national rates, all cities had better commute times and cheaper housing (both owning and renting). However, in 2018 these cities also had higher income inequality, lower median household incomes and lower homeownership rates. Ana H. Kent is a policy analyst for the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. Endnotes 1. College graduates refer to those with at least a four-year college degree. 2. In this essay, dollars have been inflation adjusted to 2018 values using the Consumer Price Index for All Urban Consumers (CPI-U). 3. ACS unemployment rate estimates tend to be higher than Current Population Survey and Local Area Unemployment Statistics unemployment estimates. The national ACS unemployment rate in 2018 was 4.9%. 4. The Gini coefficient measures inequality, where 0 indicates perfect equality and 1 indicates perfect inequality. The U.S. Gini coefficient was 0.48 in 2018. ABOUT THE AUTHOR Ana Hernández Kent Ana Hernández Kent is the senior researcher for the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. Her research interests include economic disparities and opportunity, class and racial biases, and the relationship between psychological factors and the household balance sheet. Read more about Ana’s research. B R I D G E S | FA L L 2 0 1 9 https://www.stlouisfed.org/publications/bridges/fall-2019/aspire-homes ASPIRE Homes: Tackling Affordable Housing, Recidivism and Workforce Development in Northeast Missouri Caleb Bobo Communities across the Federal Reserve’s Eighth District have sought to make housing more accessible by expanding access to homebuyer education and down payment assistance. These endeavors have proven to be beneficial, as residents are seeing increased access to credit and homeownership. But, homeownership is most often possible when communities have land prime for development or when move-in ready homes are already on the market—unfortunately, that is not always the case in rural areas. Missouri’s North East Community Action Corporation (NECAC) understands this challenge firsthand. Of the 12 counties in their service area, nine are rural. According to Carla Plotts, NECAC’s deputy director for housing development, housing stock is the largest of many challenges facing northeast Missouri. While the region has a wealth of land, home and neighborhood development has not kept up with area demand. Moreover, the existing housing stock is older and in need of repair. Since these challenges make finding safe and affordable housing difficult, resolving this problem has required unorthodox thinking. Several years ago, NECAC staff began researching successful housing development programs and came across South Dakota’s initiative, The Governor’s House.1 Created in 1996, The Governor’s House has since built and sold over 2,000 affordable homes to low-income families, the elderly, and the disabled using skilled inmates within the state’s corrections system as contractors. This method provides the incarcerated with workforce training, while also providing residents and communities with new, affordable housing options. After learning about South Dakota’s success, Plotts began searching for a way to implement a similar program in her area—resulting in ASPIRE Homes (set to launch in spring 2020). Inmates at the Northeast Correction Center in Bowling Green, Mo., will receive training from the local carpenters union and eventually be tasked with building high-quality, affordable units. Additionally, NECAC will vet buyers and provide any necessary homeownership or financial counseling before the purchase. The culmination will result in new home development and an increase in buyer preparation throughout the region. The first homes to be constructed will be 500 square feet and feature a one bedroom/one bathroom layout. Home production is expected to take a total of two to three months, with the hope that the process will speed up when more inmates are trained and logistical hitches have been remedied. Eventually, ASPIRE will begin building and selling two- and three-bedroom homes to accommodate the needs of larger families. Although Plotts believes the term “win-win” is thrown around entirely too often, she believes this program warrants the phrase. Residents will soon have a supply of new, energy-efficient housing at an accessible price point, making it easier for them to maintain comfortable lives in northeast Missouri. Rural communities who have struggled to attract large employers due to a lack of workforce housing could slowly see increased neighborhood development. In time, more homeowners and neighborhoods should stabilize municipalities’ tax bases; thus, creating the opportunity for important investments in infrastructure and education. The inmates receiving the training and building the homes are honing important technical skills. Additionally, the on-the-job experience makes them eligible to earn the necessary certifications to immediately qualify for an apprenticeship with one of the carpenters union’s signature contractors upon their release. Over time, this will pump dozens of new workers into a high-demand industry and help the formerly incarcerated effectively transition back into their communities. Most notably, as studies show immediate access to employment reduces recidivism, the program may help decrease Missouri’s overall prison population.2 ASPIRE has come to fruition due to partnerships with several community stakeholders including the Missouri Department of Corrections, the U.S. Department of Justice, and government officials. As the program launches, these partnerships will remain an integral part of its success and local financial institutions with Community Reinvestment Act obligations may find an opportunity to get involved. NECAC and several aspects of ASPIRE are well positioned to qualify for CRA credit as they incorporate affordable housing, workforce development, the revitalization/stabilization of a non-metropolitan distressed/underserved middleincome geographies, and community services targeted at low- and moderate-income (LMI) individuals. Moreover, such a holistic approach to multiple areas of community need may meet the responsive, innovative, and/or flexible threshold as described in regulation guidance.3 Community development challenges in rural America are often exacerbated by a lack of attention and resources. Nevertheless, the men and women who call these areas home care deeply about their community and are constantly searching for innovative solutions to multi-faceted problems. The staff at NECAC is no different. ASPIRE has the opportunity to make an impact by increasing affordable housing stock, encouraging neighborhood development, boosting the areas workforce and lowering recidivism. By every stretch of the imagination, that can surely be called a win-win. Caleb Bobo is a senior assistant consumer affairs examiner at the Federal Reserve Bank of St. Louis. Endnotes 1. https://www.sdhda.org/homeownership/governors-house-program 2. https://www.manhattan-institute.org/html/prison-work-5876.html 3. https://www.occ.gov/topics/consumers-and-communities/cra/12-cfr-part-25.html B R I D G E S | FA L L 2 0 1 9 https://www.stlouisfed.org/publications/bridges/fall-2019/can-work-based-learning-ease-talent-issues Can Work-Based Learning Ease Talent Issues? Sam Evans To address the shortage for talent of entry- and midlevel workers, paid work-based learning opportunities can align efforts to recruit workers in high-demand industries, while also providing a way for workers to develop their skills and earn postsecondary credentials and potentially higher wages. Work-based learning programs (e.g., apprenticeships, internships, fellowships and onthe-job training) often include a classroom/worksite component and mentorship opportunity that allows individuals to learn while they earn and employers to be directly involved in their employees’ skills training. While work-based learning strategies are a powerful tool for increasing experiential learning for students and current employees, recent surveys suggest partnerships with employers are underutilized. In The Graduate! Network’s employer survey, employers stated they were less likely to partner with higher education institutions and expressed strong interest in creating partnerships.1 While 56% of workforce agencies reported working directly with businesses on hiring or improving credentials of current employees in the Federal Reserve Bank of St. Louis’ 2017 Community Development Outlook Survey, 44% of workforce agencies are not working directly with employers.2 During a recent Investing in America’s Workforce summit in Memphis, Tenn., the St. Louis Fed gathered more than 70 stakeholders from across the Eighth District to explore how to advance work-based learning opportunities and increase educational attainment for the unemployed and underemployed. Through facilitated dialogue, summit participants outlined critical strategies and issues to address: work-based learning as a key strategy to close the skills gap; employment barriers; trauma among current and prospective workers; the importance of partnership; and, the need for additional funding and quality data. During the event, employers noted a need to scale up paid apprenticeships, internships and on-the-job training. While challenges persist, including a lack of understanding national credentials and an inability to grasp the full scope of their organizational needs, employers have opportunities to engage in sector partnerships with community representatives to expand pre-apprenticeships and skills training. Summit attendees suggested targeting industries such as hospitality and healthcare, working with co-ops, and increasing entrepreneurship opportunities to create better career pathways that build skills and increase wages. Employers and panelists also noted how work-based learning opportunities can circumvent job displacement due to automation by upskilling and providing resources to new and incumbent workers. Although there is optimism surrounding more employers hiring individuals that were previously incarcerated, a significant group of the reentry population, opportunity youth (those aged 16-24 who are neither in school nor in the workforce) and those 55 years or older, still face major barriers to work.3 While workers may participate in work-based learning programs to receive higher wages, some individuals face the “cliff effect”— when a minor increase in an hourly wage causes a sudden loss of benefits, such as childcare subsidies. Participants suggested partnering with organizations to establish and extend career and counseling programs to address any barriers to job retention. Community partners and educational institution representatives highlighted the negative effects trauma has on their clients and students (i.e., the inability to complete training and maintain a strong work ethic). There is a growing need for better information to support trauma-informed care and employee assistance programs to ensure an individual’s success in the workplace. Participants stressed the importance of partnerships to both better aligning services and increasing educational attainment among populations that experience barriers to employment. Identifying overlapping priorities and ensuring businesses are at the table bolsters the efficient use of resources and improves economic mobility for workers. Employers recommended more partnerships with two- and four-year colleges, as they have the ability to be nimble and innovative in their development of programs for on-the-job training. Educational institution representatives, employers and community partners stressed the need for better data and additional funding for books, uniforms and special tools often required when attaining a postsecondary credential. As the economy evolves, the demand for education, skills and credentials also increases—requiring new ways to build workforce talent and help all Americans secure their careers. While major corporations may have the resources to provide work-based learning training and services to support workers, small and midsized businesses continue to have a hard time with developing and implementing these programs. Workforce development boards, chambers of commerce and other community organizations have an opportunity to align benefits and services, as well as provide businesses with available subsidies, tax credits and other incentives to alleviate the financial burden to take work-based learning to scale. Sam Evans is a community development advisor focusing on workforce development at the Federal Reserve Bank of St. Louis. Endnotes 1. https://graduate-network.org/ 2. https://www.stlouisfed.org/~/media/files/pdfs/community-development/cd-outlook-survey/cdos_2017.pdf? la=en 3. Internal Revenue Code and ETA’s TEGL No. 3-09, Changes 2 and 3: A SWA certifies members of the Disconnected Youth group if they have: (1) attained age 16 but not age 25 on the hiring date; (2) not regularly attended any secondary, technical, or post-secondary school during the six-month period preceding the hiring date; (3) not regularly been employed during such six-month period; and (4) not been readily employable by reason of lacking a sufficient number of basic skills. ABOUT THE AUTHOR Sam Evans Sam Evans is a community development advisor focusing on workforce development at the Federal Reserve Bank of St. Louis. B R I D G E S | FA L L 2 0 1 9 https://www.stlouisfed.org/publications/bridges/fall-2019/sparks-announces-retirement Sparks Announces Retirement After an 11-year tenure, Yvonne Sparks announced that she is retiring from the Federal Reserve Bank of St. Louis, effective Dec. 31, 2019. Sparks (former executive editor of Bridges) joined the Bank in 2008 as the manager of the Community Development (CD) function and was promoted to community affairs officer for the Eighth District in 2013. She came to the bank with a deep understanding of the community development field and the challenges facing the St. Louis market, in particular. She also long believed that rural development had largely been a neglected area in the CD field and strategically directed Bank resources to this area, with an emphasis on the Delta region. In 2017, she accepted the challenge to stand up the Investment Connection program for the Eighth District, connecting potential funders with entities seeking funding for Community Reinvestment Act (CRA)-eligible services, loans and investments. In past two years, the program has enabled the Bank to foster constructive relationships among many bankers and community groups, and resulted in over $2.5 million in new CD funding throughout the district. Sparks’ expertise and her passion for community development work will be greatly missed. B R I D G E S | FA L L 2 0 1 9 https://www.stlouisfed.org/publications/bridges/fall-2019/calendar Calendar February 2020 3-5 2020 Skills Summit Washington, D.C. Sponsor: National Skills Coalition Visit: https://www.nationalskillscoalition.org/resources/events/skills-summit-2020 March 2020 9-12 2020 National Interagency Community Reinvestment Conference Denver, Colo. Sponsor: Federal Reserve Bank of San Francisco and others Visit: https://www.frbsf.org/community-development/events/2020/march/2020national-interagency-community-reinvestment-conference/ May 2020 27-29 2020 Reinventing Our Communities Conference: Equity InSight Philadelphia, Pa. Sponsor: Federal Reserve Bank of Philadelphia and others Visit: https://www.philadelphiafed.org/community-development/events B R I D G E S | FA L L 2 0 1 9 https://www.stlouisfed.org/publications/bridges/fall-2019/resources Resources Revised Tool Allows Wage Comparison by Occupation across Labor Markets Workers without college degrees make up the majority of our nation’s workforce. However, people tend to focus on the importance of getting a four-year degree. For a better understanding of the economic opportunities available to workers without a bachelor’s degree, view the Atlanta Fed’s updated Opportunity Occupations Monitor, which shows estimates of “opportunity occupations” (well-paying jobs that don’t require a college degree) in states and metro areas. This updated tool adds to findings published in a recent report by researchers at the Federal Reserve Banks of Cleveland and Philadelphia. Besides offering estimates of the number and share of well-paying jobs for non-college-educated workers, the tool provides historical trends on employer educational requirements for occupations in each state and metro area between 2012 and 2017. It also presents a wealth of data on wages and projected employment growth. Find additional information at https://www.frbatlanta.org/cweo/data-tools/opportunity-occupations-monitor. Fed Documentary Explores Good Jobs Not Requiring a Four-Year College Degree Opportunity occupations are the focus of a newly released documentary by the Federal Reserve. Travel, virtually, to the Toledo, Ohio area for the story of Jaime Pearson, a truck scales administrator, and learn about the region’s approach to creating a productive workforce development ecosystem. Watch at https://www.investinwork.org/opportunity-occupations. Fed Publication Explores Small Business Capital Access Small businesses are vital to the American economy and account for 99.9% of all U.S. firms and nearly half of private-sector employment. They are remarkably diverse, and constitute 44% of the total private-sector output of the economy. Business owners and entrepreneurs require access to a variety of credit sources. Yet less than half of small businesses report that their credit needs are met. The Federal Reserve’s second issue of Consumer & Community Context features three articles with original analysis focusing on small businesses’ access to capital. 1. The first article describes experiences of small business owners when searching for financing online. A review of online lender websites finds inconsistency in the disclosure of cost information, posing difficulties for prospective borrowers. 2. The second article explores disparities in small business credit approval by race and ethnicity. Black-owned firms are less likely than white-owned firms to be approved for financing at banks, even taking into account firm characteristics. 3. The third article examines small businesses’ access to financial services in low- and moderate-income communities. Since the end of the last recession, low-income neighborhoods have experienced larger declines in the number of banks and larger increases in the number of alternative financial services companies compared to higher-income areas. Read more at https://www.federalreserve.gov/publications/consumer-community-context.htm.
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