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Tools (lessons and strategies)
Toward Market Restoration:
A conference summary

Issue 4 | 2015

Workforce 2020: Is it time
for disruptive innovation?
An analysis of African American
interstate migration to Iowa

Published by the Community Development and Policy Studies Division

of the Federal Reserve Bank of Chicago

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Advisor
Alicia Williams
Managing Editor
Michael V. Berry
Assistant Editor
Mary Jo Cannistra

Contributing Editors
Jeremiah Boyle
Emily Engel
Steven W. Kuehl
Susan Longworth
Robin Newberger

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Please recycle after reading

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Issue 4 2015
In the final edition of 2015, we feature summaries of two 2015 conferences.
Senior Business Economist Susan Longworth and Michael Berry, director of
Policy Studies, prepared the summary of “Tools Toward Market Restoration,”
which explored methods and strategies to revitalize places struggling economically
following the Great Recession. Longstanding conditions of low employment
and educational attainment levels, economic and social isolation, and general
disinvestment affected these areas for decades before the recession, which was
also a topic discussed. “Future Focus: Preparing for Workforce 2020,” explored
the so-called worker ‘skills gap,’ why employers are having difficulty filling open
jobs, and ways that workforce development efforts must evolve to meet changing
needs, among other areas. The Fed’s Jason Keller, economic development
director for Illinois, with Norman Walzer and Diana Robinson of the Center
for Governmental Studies at Northern Illinois University, provide, in addition
to the summary, supplemental demographic data and information on emerging
employment trends in an article entitled “Workforce 2020: Is it time for disruptive
innovation?”. Finally, Marva Williams, economic development director for Iowa,
explores black migration to Iowa, and misconceptions about public assistance as
the prime motivation for people moving to the state.
Please note that due to its size, this edition of ProfitWise News and Views will
be issued as an online publication only.

The Federal Reserve Bank of Chicago
The Federal Reserve Bank of Chicagoand its branch in
Detroit serve the Seventh Federal Reserve District, which
IOWA
encompasses southern W
 isconsin, Iowa, northern Illinois,
northern Indiana, and southern Michigan. As a part of
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monetary policy, supervising banks and bank holding companies, and
providing check processing and other services to depository institutions.

WISCONSIN
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Tools (lessons and strategies)
Toward Market Restoration:
A conference summary
By Susan Longworth and Michael Berry
Community development post-recession takes place in
an environment that is greatly changed in terms of both
demand for and capacity to deliver services. While no
community was immune, the places that were most
deeply affected by the Great Recession – and continue to
feel its effects – are often those places that had suffered
from disinvestment for decades leading up to it. The
tools and strategies that have been developed and relied
on by investors, practitioners, and advocates – in some
cases for decades – need to be adapted to the changes,
while continuing to meet ever growing demand.
The Federal Reserve Bank of Chicago, in partnership with
IFF and the American Bankers Association, convened a
conference to discuss tools available and needed in order
to restore market vitality to the many communities that
continue to be affected by lack of investment and lowfunctioning financial service and credit markets, among
other challenges. “Tools Toward Market Restoration:
The Role of Community Capital” explored the different
types of ‘capital’ that must exist to create an ‘enabling
environment’ for investment.
This article summarizes the conference panels, focusing
on specific initiatives and lessons learned. In particular,

two tools are highlighted for their broad applicability
in assessing both the value and capacity of challenging
markets. Contributions from Robin Hacke at the Kresge
Foundation and Ira Goldstein at The Reinvestment
Fund (TRF) are featured as sidebars. Other panels are
described sequentially in the pages that follow.
Welcoming remarks were shared by: Alicia Williams,
vice president, Community Development and Policy
Studies, Federal Reserve Bank of Chicago; Joe Neri,
CEO, IFF; and Rob Rowe, vice president and associate
chief counsel, Regulatory Compliance, American
Bankers Association. Williams highlighted some
challenges faced by the Midwestern region as a whole:
population and job loss; outdated infrastructure; and an
unprepared workforce. She also quoted a warning from
the OECD: “social exclusion and spatial segregation
both reflect and reinforce labor market issues. The
concentration of significant populations with very low
skills and little labor force attachment represents both
a drag on future growth as well as aggravates shortages
in medium-skilled occupations in the labor market.”
This assessment has ramifications for the entire region,
not just for the populations in question, and requires
multiple layers and types of interventions, policy

ProfitWise News and Views Issue 4 | 2015
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reforms, and investment. A key component of private
investment is regulated financial institutions fulfilling
obligations under the Community Reinvestment Act
(CRA), but the private sector also must take part in
connecting workers, businesses, and communities to
the mainstream economy, in part through strategies
involving anchor institutions in otherwise diminished
local economies. Isolation depletes social and economic
potential. Community Development Financial
Institutions (CDFI) have nuanced local market
knowledge and can augment physical, economic, and
social assets, she concluded.
However, Joe Neri cautioned against ‘reinventing the
wheel’ by reminding the audience that a conference goal
was to identify strategies that can be replicated. Because
of the urgency faced by many communities, there is a
need to lower the learning curve, he stressed. Rowe added
the perspective of financial institutions, explaining that
the ABA looks at new regulations through an ‘inclusion’
lens, in an effort to understand how changes to the
regulatory environment affect vulnerable populations.
Eric Belsky, director, Division of Consumer and
Community Affairs at the Federal Reserve Board of
Governors, and the conference keynote, set the stage by
parsing the meaning of the conference title as it applies
to both people and places. The concept of ‘markets,’ he
opened, can be understood in the abstract, as a situation
where supply and demand come together and, in a
healthy market, are moving to some kind of equilibrium.
It can also be understood from a concrete, place-based
perspective – as places where people live and work. Belsky
took both interpretations into account when considering
the concept of “market restoration.”
Restoration implies returning something to its original
state or place – where quantities of supply and demand
are aligned. Today we are in a position of undersupply
in some areas – too little capital, too few (government)
services, too few jobs, or not enough affordable housing.
One must also consider that for some places, equilibrium
has not existed for many years, sometimes decades, if
ever. In these cases, recovery is more challenging given
that perceived risks are higher than actual, and no
individual entity prepared to take the ‘lead’ risk. The
credit constrained environment post-Great Recession
adds more headwind. Even if capital is willing to
deploy in these places, it seeks a high rate of return to

compensate. Often market participants in these areas
can’t support the high cost of capital (through rents
paid or revenues/incomes generated). So capital moves
elsewhere, creating further disparity. Community
advocates are hard pressed to identify natural sources
of demand in places that have been ‘out of equilibrium’
for 20 or 30 years, and government subsidy to fill equity
(or income) gaps in quality housing or other investments
is by definition scarce. Removing and/or repurposing
existing buildings – houses or institutional – comes with
significant financial, social, and political costs, but in the
most economically troubled communities, there are too
many vacant structures, which drives down rents and
property values.
Belsky stressed that the development of human capital
– another form of capital – is very challenging because it
doesn’t produce immediate revenues, cost recovery is longterm (and difficult to measure), and there isn’t sufficient
government funding to support large-scale quality
programs. The successful development and deployment
of human capital also requires some investments in
physical capital: from investments in safe and effective
child care centers to investments in the transportation
systems needed to connect workers with jobs.
The term “healthy communities” has gained currency
across the Fed System to describe places that thrive
economically and score well on key health metrics. Belsky
noted the utility of the phrase as a guiding metaphor to
describe areas “where investments are continually made
in the people and the place.”
Finally, Belsky took time to explain the concept of
community capital (and the related elements for its
successful deployment). At the most obvious level,
it is money – which is difficult to attract to places
with depressed demand and (sometimes) declining
population. Fixing market failures and mitigating
negative externalities requires some form of government
intervention as the market will not generate
redevelopment on its own. Tools such as tax incentives,
(social) investments, and other subsidies can help close
the gap between what low wage earners can afford
and what it actually costs to produce improvements.
Ultimately, however, successful redevelopment requires
a multi-sectorial civic infrastructure – an ‘enabling
environment’ – to absorb, manage, and deploy capital to
achieve desired outcomes.

ProfitWise News and Views Issue 4 | 2015
— 5—

Opening panel: Spatial segregation
While it is a variously defined term, a core tenet
of ‘community capital’ is socio-economic mobility
for people traditionally shut out of mainstream
capital markets – minorities, immigrants, and other
marginalized populations. However, increasing
evidence and discourse indicate that many communities
remain chronically racially and socially isolated
from opportunities – residential, educational, and
entrepreneurial. The opening panel discussed the
ramifications of spatial segregation, why it exists, and
what can be done to address it (moderated by Niala
Boodhoo, host, Afternoon Shift, WBEZ-Chicago
Public Radio).
Mario Small, Grafstein family professor of sociology,
Harvard University, opened the panel by taking
the conversation from the city-level down to the
neighborhood-level, as spatial segregation manifests
itself in neighborhoods. However, his research shows
that low-income neighborhoods differ dramatically
from city to city, particularly in their density.1 In some
cities, the poor neighborhoods are the most depopulated
of the city – for example density in Chicago’s Woodlawn
is 12,000 people per square mile. In New York, Harlem
has about 80,000 people per square mile – some census
tracts as much as 130,000. Detroit averages 6,000
people per square mile.
However, 30 years ago, Woodlawn had 22,000 people
per square mile and was a very different kind of
neighborhood. In New York, poor neighborhoods were
a little less populated, but overall there has been more
population stability. In other places, for example in the
southwest, the trend is one of population growth.
Population density is tied to organizational density,
but the relationship is not linear. As expected, more
neighborhood vitality is associated with population
density. However, the more depopulated a neighborhood
is, the more likely it is to be disproportionately
underserved relative to its capacity. At the same time,
density can bring its own problems, such as air-,
ground-, and water-born pollution that carry health and
other risks for residents. So it’s not a question of whether
a place is “better or worse,” but rather that different
kinds of development are needed in different places.

Small’s research also shows that there are additional
nuances to poor, segregated neighborhoods: higher
concentration of black residents usually means lower
commercial density; higher proportions of immigrants
usually mean higher commercial density. “So it’s
important to think about racial differences explicitly,”
he concluded.
Building on Small’s caveats regarding neighborhoodlevel nuances, Alan Berube, senior fellow and deputy
director, Metropolitan Policy Program, The Brookings
Institution, provided an illustration of the changing
profile of poverty and segregation.2
Presently, 55 percent of low-income people living in
large metropolitan areas reside outside major cities. To a
certain extent, this trend was driven by public policy that
sought to open up communities to low-income/minority
populations. But poverty doesn’t distribute evenly.
Brookings’ research shows that poverty emerges in the
suburbs in concentrated ways that mirror inner cities,
resulting in distinct areas of prosperity and distress.
The challenge of this shift is that community
development practices were designed for poverty
concentrated in urban areas predominantly. Suburban
places lack the ‘infrastructure for community
development’ and don’t have the native organizations
that have an ‘enabling environment’ for capital
absorption capacity.
However, neither time nor money exists to recreate
‘community development for suburbia.’ In the end, the
amalgam of people, organizations, and agencies that
engage in and deliver community development will
disregard ‘economically artificial’ municipal boundaries,
in order to create scale and capture efficiencies.
James Carr, senior fellow at the Center for American
Progress,3 expanded on the points of the earlier panelists,
but with a particular focus on blacks, reminding the
audience that for many blacks the challenge is not
that of market restoration, but market creation. The
challenges of creating demand within these markets
are significant and pre-date the recession. For example,
during the Great Recession the unemployment rate for
non-Hispanic whites never reached the level that it was
for blacks in the ten years leading up to the recession.
Carr also reminded the audience that hyper-segregation
– severe disadvantage, poverty, and racial wealth gaps –

ProfitWise News and Views Issue 4 | 2015
— 6—

are not the work of markets. These are the direct (longterm) result of policies and programs, beginning with
the Federal Housing Act of 1934, that were actually
designed to create and build wealth in America through
home ownership, but prohibited, explicitly, blacks and
many immigrant groups from obtaining competitive
mortgage financing, or from living in newly built homes
and neighborhoods.4 Disinvestment in housing led
to low investment in schools and other neighborhood
assets, perpetuating the poverty cycle.
The geography of poverty and the geography of race are
changing, but the color has not changed. Segregated
communities don’t function in the same way and
therefore traditional market tools do not work in the
same way. Segregation is a combination of racial and
economic disparity that results in a wealth gap of as
much as 20:1 that inhibits markets from functioning as
would otherwise be expected. Carr posited that home
ownership rates must be leveled between whites and
blacks; this would begin to address the ‘segregation tax,’
which depresses property values in black neighborhoods,
and would potentially begin to narrow the wealth gap.
Achieving this result will require changes to the housing
finance system. “The housing finance system from
before the Great Recession cannot be the same housing
finance system after the Great Recession, because
it didn’t work,” said Carr. However, he cautioned
that alternative underwriting standards do not mean
looser standards. He suggested standards that take
into account the risk mitigating effects of (competent)
borrower counseling, for example.
Carr reminded the audience that 50 years ago,
marginalizing people of color economically and socially
had less overall effect as they were then a true minority
of the U.S. population. But since 2000, the population
share of blacks and Latinos has expanded by 50 percent;
today the majority of births are people of color. Carr
stressed the dire consequences of having a rapidly
growing population that remains poor and segregated.
During the discussion period, other panelists joined Carr
in acknowledging that our low-income populations face
significant barriers to employment. In particular, for
many black males employment prospects are extremely
limited, as so many cannot participate in the labor force
due to a criminal record.

Alan Berube stressed that undocumented people and
ex-felons are distinct populations that face significant
barriers to employment. “An ex-felon is a U.S. citizen
who has a right to work; they’ve paid their debt to
society,” he advocated. “Checking the box” (to indicate
a felony conviction on an employment application) is
part of the problem.
Small asked, “What does this problem look like if
we think about it holistically – in terms of the kind
of establishments that are needed to sustain the
community and education levels needed for people
to get…mortgages and [stay] out of the criminal
justice system?” Human capital development is part
of the community investment solution, where skill
development and job creation enables wealth building
on a sustainable level. Equity in the suburban context
is very challenging to achieve because of the municipal
fragmentation that exists. Berube suggested that
gaining a better understanding of the limited financial
capacity of smaller municipalities would clarify the
relationship between fragmentation of government and
(impediments to) economic progress, economic growth,
and economic inclusion. And, Carr again challenged
the audience: “New community investment results in
seriously building the American economy of the future
– not just building a neighborhood.”
In closing the panel, Moderator Niala Boodhoo, looked
ahead to 2042 when the U.S. is predicted to become
a ‘majority minority’ country. Given the challenges the
panel had raised, she posed a fundamental question,
“Who is going to pay the bills?”
The Capital Absorption Capacity interactive session
explored the political, social, cultural, and financial
elements that create capacity for the effective deployment
of investment capital in underserved communities.
Through the interactive exercise, participants had
the opportunity to deepen their understanding of
how communities deploy investment and create an
environment that puts dollars to work on behalf of
low-income people. Participants examined a variety of
places, sectors, and approaches that seek to understand
what actions can be taken – by public, philanthropic,
nonprofit, and private sector leaders – to facilitate
the flow and maximize the impact of community
investment dollars. (Excerpted from “The Capital
Absorption Capacity of Places: A Research Agenda and
Framework Working Paper.”)

ProfitWise News and Views Issue 4 | 2015
— 7—

Strengthening community investment systems: An introduction
The Kresge Foundation, together with the John D. and Catherine T. MacArthur Foundation, has launched a project designed
to improve the ability of cities to attract and deploy private investment for public purpose. The project, which builds on
work begun at Living Cities, recognizes that mainstream financial markets do not serve the specialized and multifaceted
needs of low-income communities (where public investment is also lacking), and that harnessing public, private, and
philanthropic capital effectively to achieve important social and environmental goals requires a disciplined approach.
Robin Hacke from The Kresge Foundation presented a newly released paper, “Community Investment: Focusing on the
System” (available at http://kresge.org/library/community-investment-focusing-system), that she co-authored with
David Wood of the Initiative for Responsible Investment at the Hauser Institute for Civil Society at Harvard University and
Marian Urquilla of Strategy Lift.
The paper considers how practitioners can develop a more coordinated, strategic approach to organizing demand for
capital that generates both financial and social returns. It offers a set of tools for assessing and strengthening capital
absorption capacity, defined as “the ability…to make effective use of different forms of capital to provide needed goods
and services to underserved communities.”5 This definition takes a broad view of capital, including philanthropic grants
and public funds, bank loans, bonds, and other forms of debt and equity investments.

Making the system visible
Community investment takes place through a complex network of actors, the composition of which differs from place
to place. These individuals tend to view themselves not as having defined roles in a coherent system, but rather as
participants in transactions that use community investment tools to do things that otherwise do not get done. Making the
implicit system more visible can provide insight into those areas that function well and those that constrain the capacity
and effectiveness of investment.
One way to promote visibility is to analyze two or three transactions that exemplify what can occur. Working backwards
from those deals allows stakeholders to identify the features of the community investment system in context.
By considering the actors who participated in deals (as well as those who might have participated but did not), the
resources used and the relationships across existing actors, communities can (theoretically) identify the real and potential
boundaries of the system.

Community investment as a set of functions
Kresge Foundation research suggests that effective community investment systems are characterized by the performance
of three critical functions—activities that can be undertaken by different people or institutions in different places. By
concentrating on actions rather than institutions, community leaders can appreciate the full range of actors – regardless
of identity or credentials in the traditional community investment system or whether they are local, regional or national
actors – who contribute to the community investment process.
At the conference, participants had an opportunity to think about and share how their communities handled the three
key functions of capital absorption:
•

Setting strategic priorities: ensuring a coherent, community-endorsed vision to shape investments

•

Creating a pipeline: generating feasible deals and projects that lead to the realization of a community’s
strategic priorities

•

Shaping the enabling environment: building the policies, processes, mechanisms, and incentives that
facilitate community investment

ProfitWise News and Views Issue 4 | 2015
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Community investment as a set of functions
Strategic Priorities

Pipeline

Enabling Environment

Ensure there is a
coherent, communityendorsed vision to
shape investments.

Generate deals and
projects that together
add up to the realization
of the community’s
strategic priorities.

Build the policies,
processes, mechanisms
and incentives that
facilitate community
investment.

Articulating a clear, specific, and legitimate set of priorities that reflect the needs and involvement of
communities can help concentrate scarce resources and attention, but also smooth the path for transactions
that move priorities to realization. Comparing those priorities to the pipeline helps stakeholders think about the
collective value of actual and potential deals as well as the resources necessary to complete them. It can help
identify gaps in the pipeline, those priorities that will not be achieved given the activities currently underway. It
also helps stakeholders think how they can build on or leverage deals to achieve multiple benefits. A supportive
enabling environment for capital absorption promotes the execution of deal pipelines through formal means,
such as policies, regulations, and resource flows as well through informal relationships, institutional practices
and skills, behavioral norms, and the availability of data.

Strengthening the community investment system
Communities can attract more investment and make it more effective in a number of ways, including:
•

Forming a multi-sector team to assess the capacity of the existing system (i.e., financing/development
network, infrastructure) and identifying the changes that would enhance its sufficiency, efficiency,
and impact

•

Expanding the boundaries of the system by integrating strong regional or national actors, and/or local
stakeholders new to community investment

•

Identifying new or existing resources (grants and subsidies, guarantees, publicly owned land, etc.) that
can be leveraged to advance community investment priorities

•

Aligning attention across government agencies, jurisdictions, and sectors to address common goals

•

Advocating for supportive policies

•

Creating opportunities for ongoing reflection and learning to help practitioners build on their experience

These interventions can help produce a more robust set of investable opportunities that deliver community
benefits, and also reduce the development cycle and costs of transactions. By making the community
investment system visible and committing to improving its performance, stakeholders can help to address the
important social and environmental needs that the conventional finance system leaves unserved.6

ProfitWise News and Views Issue 4 | 2015
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Managing housing

in credit scores; $108 monthly debt decrease; and a
$4,000 increase in savings.

Municipalities are faced with significant inventories of
vacant residences, which contribute to neighborhood
blight and depressed market values. Devising
a strategy to address these properties requires a
fundamental understanding of market dynamics.
Panelists discussed strategies for recalibrating supply
and demand, restoring neighborhood stability in
a manner that is equitable and inclusive, as well as
innovative options for spurring homeownership in
challenging markets (moderator: Joe Neri, chief
executive officer, IFF).

However, the work doesn’t end with pre-purchase
counseling, he cautioned. All mortgages are serviced
– i.e., the borrower receives a monthly invoice, and
the servicer must credit their account (upon receipt
of payments) accordingly – but borrowers stretching
to afford a mortgage payment often need more active
servicing, where the servicer takes active measures
to avert default. Once a buyer has closed and moved
in, the servicer needs to ensure borrowers do not
fall behind, and intervene early if default looks
imminent. A foreclosure is a personal tragedy, but
in an economically struggling community, its effect
on housing demand and neighborhood security and
stability can be much greater than in middle- and
upper-income places. Loftin acknowledged, however,
that in many of these communities there is a gap
between the value of the home and its post-renovation
costs. Loftin suggested a solution in the form of a
forgivable (over time) second lien: the first mortgage
covers the actual value; the soft second covers the
appraisal gap. Over a specified period and on a
declining scale, the second lien is forgiven.

Mike Loftin, executive director of Homewise,
shared that in his opinion, ‘homeownership’ must be
linked to ‘building financial security’ for people, for
households, and for communities. Building financial
security through homeownership requires addressing
both supply and demand. Too many housing
programs focus solely on supply – how to add to it,
how to improve it, and how to make it more affordable
– without stimulating demand, he contended.
Building demand, Loftin continued, requires an
understanding that wages represent the primary
source of capital for borrowers. Homebuyer
counseling (for low-income borrowers) should extend
to overall household financial management to ensure
wages are spent in a manner conducive to entering the
housing market. Accordingly, prospective borrowers
must be reached when they are still trying to decide
if homeownership is right for them. At that stage,
counselors can assess readiness, purchasing power,
and other determinants that enable a buyer to qualify
for a conventional mortgage product. Homebuyer
education is a fundamental component of demand
creation if the goal is neighborhood stabilization. The
process starts with the assumption that most (but not
all) people can buy a home—eventually. ‘Pipeline
development’ – in this case a pipeline of borrowers
– is an essential component of demand creation,
preparing potential borrowers for the concept of
homeownership, perhaps before they have toured a
single home.
The outcome of this hands-on, early engagement
process is tangible. Loftin described the impact of
Homewise training: an average 60 point increase

Bethany Sanchez, executive director, Take
Root Milwaukee (Milwaukee Homeownership
Consortium), a group that facilitates communication
and collaboration across city housing groups, described
the importance of ensuring that homeownership
preservation efforts are “credible, aligned, and
legitimate.” Take Root Milwaukee’s philosophy is
“Buy a home or keep a home.” Its 50 members include
homeownership counseling agencies, financial
institutions, the city government, real estate agents,
neighborhood organizations, and other community
partners working together to promote diverse and
sustainable neighborhoods by encouraging and
maintaining homeownership. The initiative consists
of three work groups focusing on education and
capacity building, foreclosure prevention, and
marketing. The impact of Take Root Milwaukee has
also been tangible: beyond reaching thousands of
Milwaukeeans, its foreclosure prevention efforts have
preserved an estimated $11.5 million in tax revenue
and $21 million in local housing value each year.
Kate Monter Durban, associate director of the
Cleveland Housing Network (CHN) next described

ProfitWise News and Views Issue 4 | 2015
— 10 —

how her organization has been developing affordable
single-family rental and for sale housing in an
struggling inefficient market for many years, and
introduced the audience to CHN’s 15-year leasepurchase model that is financed by LIHTC, as
there is strong interest in scattered site rental to
homeownership models. CHN is the largest LIHTC
single-family affordable housing developer in the
nation – more than 2,800 units. Durban explained
that disinvestment in Cleveland started long before
the most recent housing crisis and that CHN’s lease
purchase model was started in 1981, and taken to
scale in 1987 with the advent of the LIHTC.7
With this deep experience, Monter Durban shared
some of the lessons that CHN has learned over the
years:
• Good asset management is essential, beginning
with a comprehensive property rehab (although the
group also builds on vacant land), and including
annual rent increases to manage expense increases.
• CHN retains all property management services
in house, in order to establish homeownership
expectations at move-in and to maintain control
over messaging and interactions with residents.
• Lease terms are for 15 years. Homeownership
preparation begins in year ten, when CHN
structures six-month leases, with mandatory
financial counseling sessions at each lease renewal.
It’s important to make the counseling mandatory,
stressed Monter Durban.
• The larger economic environment presents
challenges for this program. Monter Durban
stated that before the financial crisis, 80 percent of
their lease-purchase customers were bankable and
20 percent were not. Today that ratio is inverted
and requires CHN to think creatively about
financing sources, even in its, by most standards,
affordable niche.
CHN observes changes in financial behaviors after
two counseling sessions: reductions in derogatory
debt, increased savings, and improved credit scores.
Across the communities they serve, CHN has
developed 2,800 homes, with an average monthly
rent of $550. To date they have sold almost 900 of
these homes, which is an approximately 85 percent

transition rate to homeownership at the end of the 15
year rental (and tax credit) period. The median sale
price of a CHN home is a little under $20,000, and
the organization still has about 1,500 homes under
management.
Kate Ansorge, director of Housing Consulting at
IFF, presented the West Cook County Housing
Collaborative’s single family rehab program. The West
Cook County Housing Collaborative (WCCHC)
includes five suburbs extending west from Chicago:
Oak Park, Berwyn, Forest Park, Maywood, and
Bellwood. All are connected to downtown by public
rail transit. The communities vary greatly in terms
of resources for staff and training, as well as terms
of incomes and homeownership rates. In 2010, there
were over 2,000 foreclosures spread unevenly across
the five communities and WCCHC was formed to
focus on housing issues. With an intra-governmental
agreement, the communities were able to apply in
partnership for Neighborhood Stabilization Program
and other funding (to address foreclosures) that they
could not have accessed individually. As a result of the
partnership, the WCCHC has secured $14 million
in public and private funds and over $400,000 in
philanthropic funds. Over time, the collaborative
has evolved to address emerging issues, such as the
West Cook Advantage Program designed to address
the need for single family rehabs. Under this program,
the Illinois Department of Commerce and Economic
Opportunity granted $4.2 million in emergency relief
funds to do single family rehab in three collaborative
member communities that were flooded by Hurricane
Ike (Maywood, Bellwood, and Forest Park). The
funds were structured as a revolving loan fund and
the program is coordinated by IFF. Under its terms,
IFF provides financing to developers to buy and rehab
targeted homes. Upon sale of the homes to families
who are at 80 percent of AMI, the money is returned
to the fund. At that point, the fund is ‘evergreen’ and
can be used in any of the five WCCHC communities.
IFF expects 100 homes to be completed with the
West Cook Advantage Program. More recently, the
Collaborative received $3 million from the atttorney
general from the National Foreclosure Settlement
Awards. These funds are used to develop housing
for borrowers up to 120 percent HUD area median
income or AMI, an important feature as many of these
predominantly lower-income communities would like
to attract a greater diversity of incomes.

ProfitWise News and Views Issue 4 | 2015
— 11 —

Like her fellow panelists, Ansorge relayed some lessons
learned.
• Despite the collaborative structure, different
communities contribute different things and
have different expectations; levels of community
engagement vary.
• Local developers familiar with the market are key.
• Developers must have money ‘in the game,’ which
they recoup (with profit) when the house sells.
• Homeownership counseling must be provided
at the right moment. IFF makes counseling
available immediately over the phone to facilitate
homeownership in challenged markets.
• A revolving loan fund offers flexibility and expands
the impact of capital.
• Homes for sale must be affordable for a lower-income
buyer, but also attractive and competitive with other
homes available in the market.

Accommodating vacant land
For many communities, market instability is a major
headwind to land reuse and redevelopment (strategies).
Some communities, in partnership with community
groups and financial institutions, use land banking to
hold properties and land until a viable strategy emerges.
Nonetheless, community conversations about vacant land
can be challenging and painful. This panel addressed both
the quantitative and qualitative aspects of establishing a
land use strategy that is fiscally sound and works for the
community (moderator: Daniel Davis, senior manager,
Community Development, Federal Reserve Bank of St.
Louis).
Ira Goldstein, president, Policy Solutions, The
Reinvestment Fund presented Market Value Analysis
as a tool for assessing value and measuring impact in
disinvested neighborhoods. A description of this approach
is on page 14.
Jim Rokakis, vice president, Western Reserve Land
Conservancy and director of the Thriving Communities
Institute, followed the MVA presentation by saying that
land banks are an essential tool in working with distressed
and abandoned properties in any urban area. Establishing

the land bank isn’t enough, however, a reliable source
of funding must be established, beyond Community
Development Block Grants (CDBG) or philanthropic
dollars. Land bank management needs to be able to act
quickly on vacant properties. Nevertheless, land banks
still have to make their case, which necessitates research
and reliable data, to improve the odds of garnering
funding opportunities as they arise.
Even with funding, land banks must prioritize tasks.
There may be 20,000 properties to be demolished, but
the land bank may only have the capacity to do 4,000.
Rokakis recommended aggregating and targeting
demolitions so that the effects of even limited demolitions
will be felt.
Maggie DeSantis is president of the Warren/Conner
Development Coalition, which represents the east side
of Detroit: 25 percent of the city’s geographic footprint
but only 7 percent of the population. Sixty percent of
properties are vacant, and most of those are publically
owned or ownership is unclear. After consulting
with community residents, it was clear, however, that
“shutting down” the neighborhood was not an option,
but residents did acknowledge that any repopulation in
their community would be very gradual. This condition
involved an area large enough that it was also affected by
larger, systemic issues facing the city as a whole. Therefore,
solutions had to be coordinated within a larger city plan,
even if residents felt removed from larger, city planning
processes.
To address their situation, the organization needed to
be realistic about growth potential. First, any prospects
for housing redevelopment had to be balanced with
potential alternative uses. Further, density – a common
measure of success in economic development – is no
longer a valid measure in depopulated areas of Detroit.
DeSantis recommends using the term “active” instead of
“dense” to reflect desired market conditions. Residents
understand that their neighborhood will remain sparsely
populated for the foreseeable future. Counter to other
common approaches, DeSantis advocated for focusing
on the blight and surrounding vacant land, comparing it
to a ‘cancer’ that needed to be eradicated. To make the
task manageable, the community was divided into subneighborhoods, with leading community development
organizations in each area, given the large geographic
scope of the LEAP project.

ProfitWise News and Views Issue 4 | 2015
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Given the dire situation in Detroit and very scarce
resources, DeSantis had the following advice:
• Invite your competitors to the table and find a way to
work together;
• Look for ‘tent-pole’ projects that can anchor or
support other projects; and
• Align neighborhood plans with city plans.
When engaging with residents who acknowledge their
community is forever changed, DeSantis had additional
advice. Residents, she found, are well aware of their
environment – population and business loss, city service
deterioration, blight, etc. – and they are willing to help
reach realistic solutions, as long as they are involved. This
ensures that planning is driven by current conditions.
However, getting residents involved and building trust
and relationships is essential, but requires a significant
upfront investment of time and energy. Further, while she
fully supports the need for data and quantifiable research,
DeSantis recommends a balance between resident
‘insight’ and technical data. And, while consultants and
other external experts are needed to expand the capacity
of any redevelopment effort, to ensure engagement and
accountability, the input of residents must never be
treated as less important than that of outside groups.

Repurposing institutional properties
Population declines and demographic shifts have led to
changes in needs for services particularly in the realm
of educational, and to a certain extent, medical and
community facilities. What is the future of these often
large, older, single-purpose buildings? How are these
properties valued? How can the politics surrounding
the repurposing of these legacy community institutions
be managed for meaningful, sustainable outcomes?
Panelists discussed their varied experiences with the
public buildings and the layered collaborations required
to return them to their highest and best use (moderator:
William Dana, Jr., president and CEO, Central Bank of
Kansas City, Missouri).
Robin Schabes, vice president of Community Strategies
at IFF, shared their approach to working and engaging
with the community around ideas for repurposing
closed school buildings. In Chicago, closed schools
represent 43 properties, 2.9 million square feet of space,

dispersed across 20 different community areas. Through
community strategies, IFF leverages resources beyond
developer equity and loan financing.
The driving question in school repurposing, reported
Schabes, is how to get from a vacant building to a ‘renewed’
building that retains (actually reestablishes) its status as a
community asset. For IFF, the first step in the process is to
analyze properties in terms of location, size, land/building
value (in some cases, too high for a nonprofit/community
purpose), zoning, and any available incentives. Further, it
is important to take into account any existing community
plans, visions, or strategic priorities.
In Chicago, IFF is working in four different communities,
with four different types of community organizations.
Although each community is different, a common
process was followed. The first step was to establish a
strong relationship with the community partner and from
there add the technical expertise, including architects and
construction professionals. Next, the team evaluated
the feasibility of the project: could the project generate
rents that would sustain the building? Was the proposed
purpose a good fit for the building? Potential uses ranged
from housing, to health care, to early childhood care, and
other educational uses.
Schabes acknowledged that repurposing is an extremely
complex process, but one that must advance steadily to
maintain momentum. Audience members questioned the
impact of the project if it does not generate tax revenue.
Schabes stressed that even non-tax generating/paying
institutions bring people and jobs into the neighborhood
and surrounding businesses. Fellow panelist, Shannon
Jaax, noted that until buildings are transferred,
they remain school district property, accumulating
maintenance and utility costs, and using resources that
could be going to students. Both experts stressed that
repurposing these buildings returns them to active use,
removing a potential source of blight and sometimes even
reinvigorating surrounding homes and businesses.
Shannon Jaax, who is director of School Repurposing
for the Kansas City (MO) Public Schools, opened her
remarks by sharing that school closings are the biggest
economic development issue for Kansas City, which has
lost 55 percent of its population since 1950. The most
significant wave of closures occurred in 2010, when the
District closed 21 schools. Jaax was working initially
with 30 sites totaling 1.8 million square feet. The KCPS

ProfitWise News and Views Issue 4 | 2015
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Enhancing impact through Market Value Analysis
By Ira Goldstein

The market value approach
Over the last several decades, cities have had to become more strategic in determining both where and how to invest their
increasingly limited resources to revitalize neighborhoods. Data-based approaches to understanding market conditions and
determining appropriate investments have become critical to helping cities create municipal and neighborhood improvement. In
particular, data analysis tools can be instrumental in helping land banks develop effective strategies for guiding the management
of underused and abandoned properties throughout their cities. The Reinvestment Fund’s Market Value Analysis (MVA) approach,
which provides an accurate, accessible, and in-depth portrayal of market data in urban areas, is one tool cities and land banks
are using to help make decisions about resource allocation, set priorities for service delivery, and tailor intervention strategies for
specific market types.
Land banks are often confronted with difficult strategic questions. For example, how can land banks manage the acquisition
and disposition processes in a way that is both fiscally sound and impactful? Which areas should a city prioritize for cleaning
up vacant lots, removing abandoned cars, or intensive code enforcement? The MVA helps make objective, rigorously analyzed,
contemporary market data available to help answer these questions and inform decisions. It starts by assembling a substantial
amount of data for an entire city. It then uses a statistical procedure to sort a city’s census block groups into categories based on
their housing market conditions and offers guidance on the mix of public actions appropriate for each market type. Ultimately, the
MVA provides an analytic basis for allocating resources and prioritizing steps toward positive change.

Foundations of The Reinvestment Fund’s MVA
Since 2001, The Reinvestment Fund (TRF) has completed more than 30 MVAs in cities across the country. The cities are on
different growth trajectories (growing cities such as San Antonio or contracting cities such as Detroit), or are striving to reinvent
themselves from their industrial past (e.g., Philadelphia, Baltimore, or St. Louis). For each MVA, there are five underlying
assumptions:
1. Public subsidy is scarce and should be treated as a resource to catalyze a market or clear a path for private investment.
2. “Build from strength” – in distressed markets, investments built on nodes of strength are most likely to be successful.
3. All parts of a city and its residents are “customers” for its services and resources, and the challenge is to customize
investments to the particular needs and capacities that vary across neighborhoods.
4. Decisions to invest public, private, or philanthropic funds should be based on objective and rigorous analysis of market
data – as should evaluation of the impact of those investments.
5. MVAs should rely on market data that reflect actual market activity (e.g., residential sales, mortgage foreclosures, new
units permitted).
Typically, the MVA relies on a set of indicators obtained from local jurisdictions (i.e., administrative data). For example, the
indicators used to create the Baltimore MVA in map 1 included median sale price, foreclosures as a percentage of housing units,
and vacant lots. There may be variability from city to city, but generally a common set of indicators reflects the conditions that
any developer might observe when evaluating areas for investment (or intervention).
Most of these indicators are acquired at an individual address level and then aggregated to the census block group. Generally,
the census block group is the most appropriate level for this analysis. It is large enough to ensure that the data are reasonably
stable yet small enough to ensure that the ‘mosaic’ of a place is revealed.

ProfitWise News and Views Issue 4 | 2015
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Baltimore
City's
Map 1. TRF’s 2014 Market
Value2014
Analysis of Baltimore
Housing
Market Typology
A
B

Regional Choice
C

Middle Market Choice

D
Middle Market
Baltimore City's 2014
F
Middle Market Stressed
Housing MarketE Typology
G

A
B

H

Regional Choice
C

D

Stressed

Middle Market Choice

< 5 Sales 2012-2014 (Q2)

Middle Market

Commercial/Industrial

E

F

Middle Market Stressed

G

H

Stressed

Developed in partnership between the Baltimore City
Planning Department, Baltimore Housing, and The Reinvestment Fund.

Institutional

< 5 Sales 2012-2014 (Q2)
Commercial/Industrial

Green Space

Stephanie Rawlings-Blake
Mayor

Thomas J. Stosur
Director of Planning

Paul T. Graziano
Commissioner

The
Reinvestment
Fund

Developed in partnership between the Baltimore City
Planning Department, Baltimore Housing, and The Reinvestment Fund.

Institutional
Green Space

Stephanie Rawlings-Blake
Mayor

Thomas J. Stosur
Director of Planning

Paul T. Graziano
Commissioner

The
Reinvestment
Fund

Source: City of Baltimore. Map available at http://archive.baltimorecity.gov/portals/0/agencies/planning/public downloads/typology/FINAL_
HMT2014_letter.pdf.

Once the MVA is complete, TRF works with local stakeholders to identify a subset of indicators to update on a regular basis to understand
how an area is changing along these critical dimensions. City governments (or others) seeking to evaluate broad market changes
related to investment or programmatic activity may need the MVA to be completely reconstructed periodically to accurately capture
impacts via new data. For example, Baltimore has commissioned multiple MVAs on a cycle of approximately three years.

Examples of MVAs in practice
A variety of organizations has funded MVAs. Typically, the MVA is commissioned to guide key decisions about allocations of programs
and resources. Baltimore, Philadelphia, and St. Louis have used the MVA to inform consolidated and comprehensive planning efforts,
while Milwaukee used theirs to coordinate funding from government and philanthropic sources. Philadelphia is using the MVA to
inform the acquisition/disposition strategies for its newly created land bank. St Louis recently used its MVA to inform a Notice of
Funding Availability for acquisition and development of Land Redevelopment Authority vacant parcels. Detroit used its MVA many
ways but uniquely to inform the distribution of proceeds from a fair housing settlement. The state of Delaware used its MVA to target
funds for redevelopment of areas throughout the state. Finally, TRF uses the MVA on an ongoing basis in cities where we both invest
in and develop affordable housing to target our efforts and assess change.
Data-based analytical tools, such as the MVA, have applications beyond simply measuring the real estate market to prioritize housing
investment. As interest in middle markets grows, the MVA can identify a city’s middle-market places and help understand their
conditions. Because the MVA incorporates several social determinant measures, it can help drive investment to enhance physical
environments and improve the prospects for healthy communities.

ProfitWise News and Views Issue 4 | 2015
— 15 —

currently operates 37 schools, so the large number
of schools closed generated very negative responses
from affected communities. Jaax cautioned, “There is
emotion involved in school closures. Don’t try to ignore
it.” The challenge she faced was moving forward (with
repurposing) in an environment charged with mistrust.
She shared the following lessons with the audience:
• Make the decision-making process clear and
transparent: hold public site tours, invite everyone,
share market assessments, and make sure the
community is included in the decision-making
process.
• Have the community involved up front to
communicate needs and wants to developers, and
allow missteps to be addressed early and directly. This
additional effort needs to be built into the time line,
but will save time and money in the future.
• Don’t delay. The repurposing process can run parallel
to the closure process. Real estate markets change
quickly and a few months can make a difference.
• Clearly define policy guidelines.
• Never underestimate the ever-changing politics: buyin and understanding are constantly shifting.
• Finally, consider using claw-backs and deed
restrictions in order to address situations where the
developer doesn’t proceed as promised. This ensures
that the school district and the community have
recourse.
Howard Snyder is executive director of the Northwest Side
Community Development Corporation in Milwaukee, a
CDFI whose mission is to improve business conditions
on the Northwest side of Milwaukee. While not focusing
on any one initiative, he reminded the audience of the
stories and individuals behind the bricks and mortar.
He described broad community efforts to save and
upgrade a library in a neighborhood with few after-school
options. He also described his organization’s ‘grand
family’ initiative to provide housing and other services
to grandparents raising small children.8 And, looking
forward, he described his vision of a full and busy cafeteria
with ‘no empty seats’ in a former tool manufacturing
building that used to employ 15,000 people. “Today there
are 500 jobs…two years ago there were none. Hopefully,
we’re moving in the right direction,” he concluded.

In closing out the day, Moderator Bill Dana, president and
CEO of the Central Bank of Kansas City, a CDFI bank,
was able to bring the discussions back to the importance
and impact of the Community Reinvestment Act (CRA).
While acknowledging that it is sometimes challenging
to choose from a crowd of requests – “you have to have
a pretty good story” – he nevertheless advocates for
persistence. In describing several projects his institution
has been involved with – repurposing an abandoned
church to provide social services, rehabilitating a factory
to house a legacy candy manufacturer to deliver more
than 200 jobs to a LMI neighborhood – he demonstrated
that financial institutions do have “the capacity to drive
redevelopment.”

Keynote address – Cliff Kellogg
Cliff Kellogg, executive director of the Detroit Federal
Working Group and past director of the State Small
Business Credit Initiative (SSBCI), spoke about both
initiatives in his keynote remarks. According to Kellogg,
SSBCI was an opportunity to learn about what it takes to
restore markets for small business lending and investing.
Also, because of the flexibility that allowed individual
states to design their own initiatives, it turned out to be
an innovation incubator. Originally created to mitigate
risk associated with lending to small businesses and to
offset declining collateral values, SSBCI awarded $1.5
billion to the states, allocated by population and severity
of job losses. In return, the states were required to increase
leverage ratios throughout the duration of the program.
However, beyond the leverage requirement, states were
given latitude to design programs that would respond
to their local economic conditions. Ultimately, SSBCI
initiatives fell into five basic types of programs:
• Capital Access Programs: each institution builds up a
funded loan loss reserve that grows as loans originated
increase. Both borrower and public sector contribute
to the reserve. If losses exceed reserve amount, then
the institution must cover the remainder.
• Loan Participation Programs: states might purchase
fractions of loans (sometimes subordinate to other
debt).
• Collateral Support Programs: support an equity
gap, provided by government, in areas experiencing
reduced residential property values.

ProfitWise News and Views Issue 4 | 2015
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• Loan Guarantee Programs: to provide protection for
financial institutions in case of default.

• Program administrators were careful to not ask
institutions to enter into new business lines or markets.

• Venture Capital Programs: wherein the state either
invests directly or through a limited partnership in a
fund that is privately managed.

• At the same time, by allowing flexibility in design and
implementation program, administrators ensured that
state-level programs would not be narrowly targeted
or marginalized.

To date, the program has resulted in more than $4 billion
supported in loans and investments. Average loan size
is $475,000 and range from $60,000 to $1 million for
loan participation or venture capital programs. Over half
the loans were to young firms (less than 5 years old).
Eighty percent of loans went to firms with fewer than
ten employees and more than 40 percent of loans went to
firms located in LMI neighborhoods.
Lessons learned:
• Offer partial protection – not full protection – to
investors. Everyone must have some ‘skin in the game.’
• SSBCI encouraged states to think of their program
as an evergreen fund – not as a one-time program.
Financing was tracked over the life of the program
into recycled loans and into subsequent financing.
The full impact of the program continues to evolve.
• Program administrators learned that programs needed
to be actively marketed to banks and other lenders, in
order to be accepted into the private sector.
• The purpose of the credit enhancement was to make
sure that lenders were complying with their own
credit policies, not to encourage high-risk lending.
• Venture capital (VC) programs did not primarily
set out to restore markets – but the lack of an equity
market was a pre-existing condition. These VC
programs sought to bring forth private equity that did
not previously exist, which required acquiring both
the talent and the capital.
• Looking across the states, it became evident that no
single strategy, partnership, or product feature could
ensure that a small business loan program reached
LMI or underserved markets. What worked in one
market might not work in another.
• However, states that were most effective at reaching
underserved markets were the same states that had the
most effective overall programs.

Kellogg then turned to the Detroit Federal Working
Group (DFWG), whose purpose he described as what
Washington and the federal government can offer to the
priorities that have been established by native Detroiters
and the organizations that work there. Stressing that
the recovery of Detroit is an administration priority, the
DFWG is an example of a place focused effort by the
federal government to work collaboratively with local
leadership and across federal agencies, thereby increasing
capacity of local leaders to do their work. Local priorities
need to be defined first in order to leverage federal
resources. Examples of priorities for Detroit (from the
mayor):
1. Restart the single-family mortgage market.
2. Find additional funding for anti-blight efforts to
demolish abandoned, foreclosed homes.
3. Support workforce initiatives in the city of Detroit.
4. Address the high cost of auto insurance.
What the DFWG contributes:
1. Secure expertise – outside groups have helped upgrade
IT systems and (lay the groundwork to) install highefficiency LED streetlamps.
2. Procurement support – new, modern buses have
restored the city’s public transportation services.
3. Repurposing/prioritizing funding – $50 million
of ‘hardest hit’ funding moved from mortgage
foreclosure relief to demolition.
Kellogg focused in particular on the first mayoral goal,
asking for specific guidance from the audience on how to
restart a mortgage market in an environment that is 90
percent cash transactions, where distressed sales greatly
distort the market. He invited creative solutions building
on what he had heard so far – home buyer counseling to
create a pipeline of demand, shared appreciation models,
forgivable soft second loans, and home rehab loans or

ProfitWise News and Views Issue 4 | 2015
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grants. However, the challenge remains establishing values
in a market defined by instability and no functioning
mortgage finance infrastructure.
Neri added that any market development strategy must
start with the current residents of a neighborhood, stressing
that it is “easier to retain (residents) than to attract (new
ones).” However, any retention strategy must take into
account insurances costs, taxes, safety and security, and
a variety of other factors. A single-family strategy needs
to be ‘encircled’ by these other considerations. But for the
lack of financing opportunities stemming mostly from
collateral gaps, a cohort of people and families paying
$800 or $900 in rent have the capacity, perhaps even the
credit history to get financing.
Appraised value of homes is a real challenge and dilemma.
Detroit’s problems don’t lend themselves to immediate
market rate solutions.
Dan Nissenbaum from Bank of America relayed his
experiences following Hurricane Katrina in New Orleans.
There, the rehab/construction housing market was stalled
because there were no end-loan take outs, as no lender
was willing to provide that forward commitment. The
Enterprise Fund established a ‘take out’ fund in the
event there was no buyer so construction financing could
continue to flow. By the time it was operative, the market
had recovered to a degree and it was never used, but the
goal remains the same: to reinvigorate the market to the
point that conventional products and services come into
play.

Small business panel: Connecting
people to the economy
Asset building and job creation have traditionally been
key motivations for community capital initiatives, and
requires multi-faceted, multi-sectorial strategies to
connect with difficult to reach populations. Promoting
small business ownership and entrepreneurship (which
address both job and wealth creation) is an integral part of
many market redevelopment strategies. Panelists explored
this topic, the complex inputs required for success, as well
as strategies and tools for tracking outcomes (moderator:
Matt Roth, chief operating officer, IFF).
Jonathan Brereton, CEO of Accion Chicago, introduced
his organization to the audience. As the leading
microlender in the city of Chicago, Accion serves primarily

young, very small businesses that, with average credit
scores and revenues of 630 and $175,000, respectively,
often do not meet the underwriting criteria of traditional
financial institutions. Accion serves a diverse client base:
75 percent of its businesses are located in LMI areas; 70
percent of borrowers are minority; and 45 percent are
women. Its activities are high-impact: Accion’s lending
created 2,400 jobs in 2014.
Brereton highlighted that these accomplishments took
place within a changing small business lending landscape:
since 2007, the average Illinois SBA loan size has grown
from $100,000 to $350,000, meaning that SBA lending
may be out of reach for businesses seeking smaller
amounts of capital. In addition, there are new, web-based
entrants into the small business lending market; Brereton
questioned some of their practices including low (or no)
documentation (of underwriting criteria – a practice
identified post financial crisis as a trigger of the mortgage
‘meltdown’) and transparency, and very high interest
rates.
Vicky Stein, director of Relationship Management at
the Community Reinvestment Fund (CRF), described
the evolution of their business model from a CDFI that
primarily bought and (then) sold loans into the secondary
market, to an SBA 7(a) lender, a New Markets Tax Credits
(NMTC) allocatee, a provider of permanent affordable
housing financing, and a participant in the CDFI bond
guarantee program. This shift from being an intermediary
lender to being a direct lender has helped CRF to focus at
the community level. CRF’s 7(a) lending program targets
minority- and women-owned businesses. Recently CRF
passed a milestone of lending more than $100 million to
more than 200 businesses. Their loans range in size from
$50,000 to $4 million. CRF’s geographic footprint has
expanded as well: they now, with support from Chase,
target three specific cities in the Midwest – Chicago,
Detroit, and Milwaukee – to deploy their 7(a) program.
Geographic specialization allows the organization to
build deep collaborative relationships with lenders.
Dan Nissenbaum, director of the Urban Investment
Group at Goldman Sachs, introduced the audience to their
10,000 Small Businesses Program, to which Goldman has
committed $500 million. This comprehensive program
includes three elements essential to small business success:
education, business support services, and capital. Again,
following a model that combines geographic targeting
and working with local partners, Goldman Sachs

ProfitWise News and Views Issue 4 | 2015
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identifies a local community college to deliver a uniform
curriculum. Nissenbaum stressed that the education and
support components are just as important as financing.
“Access to capital is critical, but it’s not always the answer
for companies.” Of participants in the 10,000 Small
Businesses Program, 63 percent of businesses increase
revenues after six months and 50 percent have added jobs.
Although all three organizations target different
segments of the small business market, the three panelists
acknowledged that communities that have faced historic
discrimination haven’t had the asset building opportunities
available elsewhere and have persistent barriers to capital.
Loans in amounts between $100,000 and $300,000 are
critical for small businesses, and yet, as shown by SBA
trends, this segment of the credit market is rarely targeted
by mainstream financial institutions. CDFIs demonstrate
their importance as a counter-cyclical source of capital by
making loans that mainstream institutions, for a variety
of reasons, eschew.
Nonetheless, small business lending is one area in which
CDFIs often compete with mainstream lenders. In the
small business lending arena, CDFIs represent a stepping
stone to mainstream financing and credit; to accomplish
this goal, their organizations need to be able to scale,
especially with the proliferation of online lenders that
leverage technology platforms to extend credit broadly
and aggressively. Although some CDFIs are starting to
introduce their own efficiencies through technology,
CDFIs currently have to rely on innovative partnerships
and collaborations to reach target borrowers.

Revitalizing commercial corridors
Bringing businesses and services back to a community is
an integral part of neighborhood stabilization. However,
repopulating a vacant commercial corridor with vibrant
businesses requires attention to both the buildings and
prospective tenants. Understanding existing market
dynamics and adapting as they change is a challenge for
property and business owners. This panel, leveraging
multiple facets of community capital, explored innovative
partnerships that combine “bricks and mortar” support
with small business technical assistance and financing
(moderator: Michael Grover, assistant vice president,
Community Development, Federal Reserve Bank of
Kansas City).

Eric Robertson, executive director of LIFT, a CDC and
CDFI working at the neighborhood level in Memphis,
described how LIFT was created out of a city-wide
planning process, which demonstrated that Memphis
did not have city-wide, comprehensive community
development organizations focused on community
development at the neighborhood level. The process also
demonstrated that “neighborhoods need tool kits” that
include incentives and enhancements often restricted to
downtown development, but targeted to the community
level.
Working in the Broad Street Corridor of Memphis,
Robertson illustrated several of the projects that have
revitalized the area – from a microbrewery to a guitar
shop – making use of façade improvement programs, as
well as mentoring and training programs available from
LIFT board members.
Moving from a vision for the street to an executable
plan took a cross-section of partners (i.e., merchants,
representatives from the mayor’s office, government, and
funders) and time. In the interim, the organization used
place-making tools, such as placing temporary ‘pop-up’
shops in vacant retail spaces or turning vacant loading
dock into a stage, while maintaining the character and
orientation of the area. However, Robertson cautioned
that the managers of a neighborhood commercial
corridor (program) must be sensitive to existing
residents and ensure that they can take advantage of the
transformation.
Isabel Chanslor, director, NDC Business Lab,
Minneapolis, described an ambitious transit-oriented
development project that greatly impacted one of their
target communities. The University Avenue project
was an 11-mile, light rail transit project, which was
going to run to a diverse, small business corridor that
had experienced 30 years of disinvestment, within a
community divided by an expressway project in the
mid-1960s.
Chanslor described how this 11-mile project – where
there were to be 16 stops, plus three more that the
community deemed were missing – took five years,
three of which were ongoing periods of construction.
Lining this corridor were 1,500 businesses, 500 of
which have revenues under $2 million. The NDC
goal was not to lose a single business as a result of
construction disruptions. To demonstrate what a

ProfitWise News and Views Issue 4 | 2015
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community-led, community-owned, transit-oriented
development could look like, NDC had a pilot
TOD project up and running before construction
even started – with commitments to the community
regarding local representation in leasing and hiring
practices.
NDC counted businesses in order to put resources where
they were needed most, and developed a forgivable loan
program. They also worked with business owners and
property owners to ensure business façade ‘aesthetics’
and visual harmony with surroundings. Nevertheless,
businesses along the corridor lost roughly half of their
sales during the nine-month construction season,
which was further complicated by the recession and
a pre-existing disinvested community. Following the
completion of the light rail line, property values and
taxes are increasing, pricing smaller, lower-revenue
businesses out of the neighborhood.
Benjamin Kennedy, deputy director for Community
Development-Detroit with The Kresge Foundation,
turned the audience’s attention back to Detroit with his
description of the Woodward Avenue Corridor, which
he contended illustrates the concentration, stacking,
and aligning of strategies and resources. He described
the M-1 light rail transit system – currently inclusive
of 12 stops and 3.4 miles – which is expected to be
not just a circulator, but the beginning of a regional
system. Kennedy detailed for the audience a few of
the key steps the steering committee took in order to
maximize investment return along the corridor.
They developed the New Economy Initiative, a
partnership with nine other foundations, to unlock
latent demand along the corridor using a variety of
strategies, including anchor institution engagement,
high-growth business development through early
stage funding, technical assistance, and the creation of
incubator space. They currently have a $100 million
fund under management.
The organizations created Midtown Detroit, through
the merger of two smaller CDCs, to create an entity
with the “heft and sophistication” to engage large
anchor institutions, but also with small businesses and
local institutions. The New Economy Initiative also
works to engage the private sector. Most are familiar
with Quicken Loans and the investments its founder
and CEO, Dan Gilbert, has made in Detroit. However,

there are many other, although smaller, examples of
private companies moving their employees from the
suburbs to downtown locations.
The Kresge Foundation is focused on park space,
public space, and streetscapes – the things that help
incentivize big employers to relocate to a re-emerging
commercial corridor. The Foundation has invested in
quality of space, quality of life, including the Eastern
Market, which is destined to be the center of the local
food economy.
And, Kennedy believes, it takes some luck. For
example, the Detroit Red Wings have opted to build
their new arena between midtown and downtown.
Representatives of the New Economy Initiative are
working with the developer to ensure the arena ‘nests’
within the larger vision for the corridor. In the case of
midtown, Whole Foods was a silver bullet. However,
Kennedy stressed, silver bullets aren’t always in the
form of national chains – sometimes a local coffee shop
or brewery can catalyze further growth.
However, the reality remains that the risk levels in
Detroit are still intolerable for many mainstream
lenders. The partners have worked together to find
some middle ground where banks could participate
to deliver capital on a scale that CDFIs and the
philanthropic community can’t. To date, this middle
ground exists on a project-by-project basis: “We know
what we have to do to get the next project done,”
Kennedy stated, but a systemic solution has yet to
emerge.

Re-envisioning the anchor
As much as communities may be overwhelmed by lists
of what is missing or not working, they must also take
time to inventory their assets, often in the form of key
anchor institutions. Various types of organizations
can serve as anchors. This panel focused on leveraging
extant anchor institutions, attracting various funding
to serve multiple community needs, and how to
engage a reluctant anchor (moderator: Michael Berry,
director of Policy Studies, Community Development
and Policy Studies, Federal Reserve Bank of Chicago).
Tools Toward Market Recovery was certainly not
the first conference to explore the roles and impacts
of anchor institutions in economically frail or

ProfitWise News and Views Issue 4 | 2015
— 20 —

recovering communities, but what constitutes an
anchor institution may now include more than the
traditional “eds and meds” that employ local residents
and consume local services.
Michelle Hoereth of IFF, a CDFI that serves much
of the Midwest with financing, development services,
and community needs assessments, discussed an early
stage partnership with Ingalls Hospital in Harvey,
Illinois, a city about 20 miles south of Chicago’s
Loop, which is struggling economically in most ways.
Notably, Ingalls has committed to stay in Harvey
despite its economic woes, and has further engaged
IFF to think about ways to bring tangible, enduring
assets to Harvey.
Approximately one-third of Harvey households have
income below the poverty line, roughly $24,000 for
a household of four. IFF had already financed two
federally qualified health centers, commonly referred
to as FQHCs, day care centers, and provided lines
of credit to other service providers. Addressing the
concern that Harvey is a “food desert,” and building
on the asset base that it has helped establish, IFF is
working with Ingalls to build on its work in Harvey
by developing a fresh food/grocery store. Hoereth
noted that IFF’s relationships with Ingalls and with
the city of Harvey are not isolated to this effort, and
that IFF is interested in fomenting further, sustainable
and impactful development of daycare, housing, and
assisted living facilities, among other possibilities. A
possible extension of redevelopment and community
engagement efforts is a longer term strategy with
Ingalls to relocate its procurement services (closer
by). She also mentioned that, while numerous
studies explore relationships between large medical
and educational facilities in economically struggling
urban settings, she has not found a similar study
looking at this relationship in suburban communities.
Even among the extant urban case studies, similarities
are few. In short, while there are some opportunities to
learn from other redevelopment efforts, an impactful
strategy must take into account both Harvey’s assets,
such as proximity to major interstate routes and rail
(freight and passenger), and challenges, including low
educational attainment, high unemployment, low
property values, and generally few advantages.
A 30-year plan, or even a ten-year year plan, was not
appropriate in the context of Harvey where the needs

are more immediate. Therefore, the team used the
strategy of “planning while doing.” An example of a
high-impact project revolved around employer-assisted
housing. The hospital wanted to address the fact that
very few of the hospital’s professional staff actually
lived in Harvey. Harvey has a rich transportation
system and a supply of affordable housing – although
many units are in need of upgrades. IFF, being a
CDFI, has flexible capital to deploy, in addition to
strategic, capacity-enhancing assistance. IFF also has
the capacity to address other gaps, such as shortages
in supportive services, and senior and assisted living
housing.
Will Towns, assistant vice president, Neighborhood
Initiatives, Office of Civic Engagement at the
University of Chicago, introduced the university as
one of the world’s greatest research institutions – but
one that is surrounded by poverty and poor school
structures. When the school was established in 1890,
it was surrounded by farmland. Today, “How can the
assets that are on campus strengthen and broaden
the neighborhoods?,” he asked. The university has
established that this can occur in four ways:
1. As an educator
2. As a research institution
3. As a center for innovation and entrepreneurship
4. As an anchor institution
However, large anchor institutions are often very
complex and siloed. Using the example of the University
of Chicago, Towns cited its 147 departments, with
more than 200 concurrent initiatives, in addition to
individual faculty research agendas. However, even
such a large organization can’t do everything alone
and, thus, the next question is, “Who can we partner
with?”
Current initiatives include working along a primary
commercial corridor in the neighborhood to
demonstrate that density and demand exists for
additional development, including re-opening a
movie theatre that had been closed for more than a
decade. At the same time, the school recognizes that
it is competing against other top institutions for high
caliber students and faculty who demand community
amenities that blur boundaries between school

ProfitWise News and Views Issue 4 | 2015
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and neighborhood, including addressing persistent
security perceptions.
McLean Wilson is a principal of Kemmons Wilson,
the lead developer for the Sears redevelopment project
in Memphis, Tennessee. The building in question
was a Sears distribution center, home to the Sears
executive offices for the southeastern region, and a
retail store. At its peak, 2,500 people worked in one of
those functions across 1.5 million square feet. When
the building was built, it was a suburban location,
but a neighborhood grew around it and today the
neighborhood is in what is considered the city center.
Things began to change in 1983, when Sears closed
all of its distribution centers. In 1993, Sears closed
its Memphis offices and the retail store as well. The
building was empty for over 20 years.
Fortunately, in this case, models and strategies to
follow and emulate could be found in the experiences of
other redeveloped distribution centers in Minneapolis,
Seattle, Boston, and Atlanta. At the same time, the
design needed to be right for Memphis. However,
the timing was as challenging as in 2010, dollars for
speculative real estate development were scarce. The
planning team knew that Memphis excelled at arts,
education, and health care, and therefore wanted
those elements to be reflected in the building’s
usage. Further, because of the structure’s legacy as
a community anchor, it helped to think about the
building as a neighborhood to be populated – not as
a building to be filled. So rather than questions about
what tenants could occupy the building, questions
focused around what makes a healthy, vibrant
neighborhood? In the end, eight organizations came
together to occupy 500,000 square feet, equivalent to
the amount of space generally occupied by a big box
tenant or a national retailer. With those commitments
in place, the developers were able to enter into
conversations with financial institutions.
Wilson stressed that tenant mix is important; for the
Crosstown project, they focused on organizations that
are more effective when in proximity to one another.
At the same time, the development team didn’t want
the sustainability of the building dependent on retail
sales. To manage costs and engage investors, historic
tax credits were used, which limited what could be
done to the façade of the building, but left flexibility
to adapt and modernize the interior. In the end, there

were 30 layers of financing totaling $200 million;
$80 million of which is in senior debt. The project
involves 1,000 construction jobs and will yield
850 (net) new jobs.

Conclusion
The conference concluded by engaging the audience
in a discussion to highlight key learnings. Participants
noted that although the conference started from
the abstract notion of ‘markets,’ discussions were
grounded in both people and place. With an emphasis
on Midwestern conditions, panelists explored the
nuances surrounding race and ethnicity (people),
suburban vs. urban (place), and wondered whether
there were enough similarities across people and place
to build replicable scale.
Nevertheless, commonalities were identified in terms
of needing to build resilience and capacity, and
address human capital development needs in addition
to those of the built environment. Audience members
hoped to find a balance between standardization and
customization.
However, frequent comments reflected that risk –
perceived or real – needed to be addressed if financial
capital is expected to flow. Different sectors – public,
private, nonprofit, governmental – have different
roles to play in mitigating risk. The bankers in the
audience discussed their role, and how that role may
change depending on the size of the bank and the size
of markets served. It was also stressed that nonprofit
groups and others outside of the financial sector
need to understand the Community Reinvestment
Act, its role, its intent, and how banks perceive its
impact on their work. At the same time, many banks,
especially the smaller banks, are integral parts of their
communities and are dependent on the ‘markets’ in
those communities for their own solvency. For many
larger banks, community development is a department,
just part of a much larger institution.
Audience members were encouraged to use the Federal
Reserve and its convening power. Reserve Banks are
located in urban areas, and many of these are older,
urban areas so these are familiar issues. Dialogue is
important, especially across geographies, and the
Reserve Banks, as part of a larger system, can facilitate
that dialogue.

ProfitWise News and Views Issue 4 | 2015
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Notes
1. Small, Mario L., 2014, “No Two Ghettos are Alike,” The Chronicle Review – The
Chronicle of Higher Education, March, available at http://scholar.harvard.edu/files/
mariosmall/files/small_2014_no_two_ghettos_are_alike_-_the_chronicle_
review_-_the_chronicle_of_higher_education.pdf?m=1414194594.
2. For more information, visit http://confrontingsuburbanpoverty.org/.
3. For more information on Carr’s work, visit https://www.americanprogress.org/
about/staff/carr-jim/bio/.
4. Berry, Michael V., 2013, “Historical Perspectives on the Community Reinvestment
Act of 1977,” ProfitWise News and Views, December, available at https://www.
chicagofed.org/publications/profitwise-news-and-views/2013/pnv-dec2013.
5. Initiative for Responsible Investment and Living Cities, 2012, “The Capital Absorption
Capacity of Places: A Research Agenda and Framework,” March, available at www.
livingcities.org/knowledge/media/?id=97.
6. To learn more, contact Robin Hacke at rlhacke@kresge.org or see the materials that
have been published on this topic, which are available at http://hauserinstitute.org/
iri/about/capital-absorption.
7. CHN makes available a manual that describes their lease-purchase program,
available at http://www.chnnet.com/news-publications.aspx.
8. Engel, Emily, 2014, CDPS Blog, “Villard Square: Innovative Affordable Housing in
Milwaukee Developed by Northwest Side CDC and Financed by BMO Harris and IFF,”
February, available at http://cdps.chicagofedblogs.org/?p=1262.

Biographies
Susan Longworth is a senior business economist in the
Community Development and Policy Studies Division at
the Federal Reserve Bank of Chicago.
Michael Berry is the director of Policy Studies in the
Community Development and Policy Studies Division at
the Federal Reserve Bank of Chicago.

ProfitWise News and Views Issue 4 | 2015
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Workforce 2020: Is it time for
disruptive innovation?
By Diana Robinson, Norman Walzer, and Jason Keller
Introduction
Whether framed as a gap, a shortage, or a mismatch,
skill problems drive discussions around workforce
and education policy today.1 Employers say they are
not getting qualified candidates from educational
institutions; unions and workforce advocates say that
if employers looked harder and offered increased wages
and improved benefits, qualified workers could be found.
At the same time, community colleges and vocational
training centers say that rapid changes in technology
make it cost-prohibitive to buy the latest machines and
training tools. Aspiring workers say they are unaware of
the resources available to them or unable to navigate an
overly bureaucratic system.
Since the 1970s, workforce programs have tried to match
educational programs and training opportunities with
employers’ needs for skilled workers. However, these
have been described as a “series of piecemeal attempts to
improve services in specific locations, meet some targeted
employer needs, and remove barriers facing working
adults in certain locations who want to pursue education
and training.”2 The challenges of streamlining services,
addressing local and regional demands, and removing
barriers to employment are significant. Nevertheless,
for the national economy to reach its full potential, the
demand for workers must be met by workers with the
right skills at the right times.
To explore this topic further and to better understand
the current workforce challenges in Illinois, Indiana, and
Wisconsin, the Community Development and Policy

Studies (CDPS) Division at the Federal Reserve Bank
of Chicago partnered with the Center for Governmental
Studies at Northern Illinois University (CGS) to host a
conference entitled, Future Focus: Preparing for Workforce
2020, in February 2015. CGS has a long history of
working with local governments and businesses on
workforce issues.3 CDPS examines regional workforce
development trends under the Federal Reserve’s dual
mandate, as well as opportunities for regulated financial
institutions to receive credit for funding workforce
development programming under the Community
Reinvestment Act (CRA).
At the conference, against the backdrop of the new
Workforce Innovation and Opportunities Act: Investing
in America’s Competitiveness (WIOA),4 participants
learned about current and proposed practices for
attracting and retaining talent, upgrading the skills of the
underqualified, and overcoming barriers to employment.
This article first examines current regional (Illinois,
Indiana, and Wisconsin) demographic, economic, and
occupational trends and how they affect the ability of
employers to meet workforce demands during a period
of economic expansion. Next, a variety of practices
designed to equip workers with the skills to participate in
the labor market, are considered. The authors conclude
that these practices, while promising, are insufficient
to deliver the large-scale change needed, and contend
that the workforce development field requires ‘catalytic
innovation’5 to respond to current and future challenges.
The WIOA provides an opportunity for new leadership
and innovation in this endeavor.

ProfitWise News and Views Issue 4 | 2015
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Trends shaping the region’s workforce
Nationwide, many demographic, economic, and workplace factors, including increasing median age of workers (and
population generally) and migration from rural to metro areas, hold true in the Chicago region. Further, the continued
bifurcation of the labor market toward well-paying jobs requiring technical skills and low-wage, low-skill jobs dominating
the service sector resonates in the tri-state region as well.
The aging of the population points to challenges in the coming decade. First, the cohort over the age of 60 will increase
by 1.3 million (chart 1). However the prime working age population cohort, between the ages of 30 and 59, is expected
to increase by only approximately 50,000.
An equally important implication involves differences between nonmetropolitan and metropolitan areas. Increases in
60 year and older cohorts are roughly similar in both metro and nonmetropolitan areas. However, while metro areas will
see a slight gain in their population ages 30-59 (9,072), nonmetro areas will lose over 100,000 people in the vital 30-59
working-age cohort between 2015 and 2025.

Chart 1. Projected population changes by age group­/tri-state region, 2015-2025*
Percent Change
40%
* Includes the states of Illinois, Wisconsin, and Indiana. Population
gain/loss include metropolitan and nonmetropolitan areas combined.
30%

28.1%
25.7%
21.7%

20%
16.5%

10%

8.7%
6.4%

5.0%

3.5%
0%

-74,829
+287,558

-497,107
+397,865

-0.6%
-5.9%

+1,174,769

+199,926

Ages 60-79

Ages 80+

-8.2%

-10%

-15.4%
-20%

Ages 0-14

Ages 15-29

Ages 30-44

Metro

Ages 45-59

Nonmetro

Source: Woods & Poole Economics, Inc., 2015.

Likewise, there is a common perception that most future jobs will require higher levels of education. According to
the Bureau of Labor Statistics (BLS), however, the largest number of jobs projected to 2022 (4.6 million) will require
only a high school diploma or equivalent (chart 2) followed by those that require even less than a high school diploma
(4.2 million jobs). By comparison, an associate’s degree accounts for 1.0 million and bachelor’s degree represents
3.1 million of projected jobs (chart 2).6

ProfitWise News and Views Issue 4 | 2015
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or eq

Associate's degree
High school diploma
or equivalent
Less than high school

Chart 2. Where the jobs are: Projected national employment
change by education level, 2012-2022
Less than high school
High school diploma
or equivalent

Postsecondary non-degree award

According to the Bureau of Labor Statistics, the largest
Bachelor's
number of jobs projected to 2022 will require only
a highdegree
school diploma followed by those that require
school diploma High
or equivalent
or equivalent
even less than a high school diploma.

Some college,
no degree
Postsecondary
nondegree award
Associate’s degree
Associate's degree
Bachelor’s degree
High school diploma
or equivalent
Master’s degree

Associate's
degree
Source:
Bureau
of Labor Statistics.
High school diploma
or equivalent

Less than high school

Doctoral or
professional degree
0

1

2
3
Employment in millions

4

Less than high school

Less than
high school

5

Associate's degree

Chart 3. Typical education needed for ten fastest growing occupations, 2012-2022
Nationally

Tri-State Region
Associate's degree
High school diploma
or equivalent
High school diploma
or equivalent

Postsecondary nondegree award
Bachelor's degree

Less than
high school

Less than
high school

Associate's degree
Source: Bureau of Labor Statistics.

Chart 3 illustrates this phenomenon graphically, at both the national and the regional level, indicating that the demand for
Associate's degree
workers
with less than a high school degree is particularly dominant in the tri-state region.
High school diploma
or equivalent

Postsecondary nondegree awardNews and Views Issue 4 | 2015
ProfitWise
Bachelor's degree

— 26 —

Associate's degree

Table 1. Twenty fastest-growing occupations by number of projected new jobs, 2012-2022
Projected New Jobs
Nationally, 2012-2022

2014 Median
Annual Pay

Personal care aides

580,800

$20,440

High school diploma

Registered nurses

526,800

$66,640

Vocational school, on-the-job training, associate's degree

Retail salespersons

434,700

$21,390

High school diploma

Home health aides

424,200

$21,380

High school diploma

Combined food preparation and serving
workers, including fast food

421,900

$18,410

Little or no preparation, high school diploma or GED

Nursing assistants

312,200

$25,100

High school diploma

Secretaries and administrative assistants,
except legal, medical, and executive

307,800

$33,240

Vocational school, on-the-job training, associate's degree

Customer service representatives

298,700

$31,200

High school diploma

Janitors and cleaners, except maids and
housekeeping cleaners

280,000

$22,840

High school diploma

Construction laborers

259,800

$31,090

High school diploma

General and operations managers

244,100

$97,270

Vocational school, on-the-job training, associate's degree

Laborers and freight, stock, and material
movers, hand

241,900

$24,430

High school diploma

Carpenters

218,200

$40,820

High school diploma

Bookkeeping, accounting, and auditing
clerks

204,600

$36,430

Vocational school, on-the-job training, associate's degree

Heavy and tractor-trailer truck drivers

192,600

$39,520

High school diploma

Medical secretaries

189,200,

$32,240

Vocational school, on-the-job training, associate's degree

Office clerks, general

184,100

$28,670

High school diploma

Childcare workers

184,100

$19,730

High school diploma

Maids and housekeeping cleaners

183,400

$20,120

High school diploma

Licensed practical and licensed vocational
nurses

182,900

$42,490

Vocational school, on-the-job training, associate's degree

Occupation

Education Level Required

Source: Bureau of Labor Statistics.

A closer examination of job projections further illustrates the increase in jobs at the low end of the skills spectrum, but
with added implications of low pay. Table 1, which compares the 20 occupations with the highest projected numeric
change in employment, shows that 14 of these jobs do not require education beyond high school. Retail salespersons
(434,000), combined food preparation and serving workers including fast food (412,000), and secretaries/administrative
assistants (307,800) are examples of growing occupations requiring low educational attainment.7
Also true, however, is that these occupations are relatively low wage, with 16 of the 20 occupations paying an average
annual wage below what the Massachusetts Institute of Technology calculates as a living wage for one adult and one
child.8 While these jobs play a key role in our economy, it is important that the workers filling them are able to acquire
additional skills. The advantages of doing this are evident in the remaining occupations in table 1, all of which are
middle-skill and command, with few exceptions, higher salaries.

ProfitWise News and Views Issue 4 | 2015
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However, when broadening the definitions of ‘skills’ to
include years of experience and on-the-job-training, as
well as other intangibles, the National Skills Coalition
estimates that as many as 25 million, or 47 percent, of all
new job openings from 2010 to 2020 in the U.S. will fall
into the middle-skills range.9
According to a state-by-state analysis, in Illinois for
example, middle-skill jobs represented 54 percent of
the Illinois labor market in 2012, but only 43 percent of
the state’s workers were trained to the middle-skill level.
Similar trends were noted in Indiana and Wisconsin.

The context of workforce planning
Peter Cappelli, the George W. Taylor Research
Professor of Management at the Wharton School for
Human Resources, helped frame the environment in
which workforce planning must occur during the 2015
conference.
Cappelli stated that globalization of the economy with
increased competition from other countries, advances
in technology, fluctuations in productivity, and other
changes have reduced the ability of employers to
accurately forecast operations beyond 12-18 months,
thereby complicating planning activities for many
companies. Plans are now revised at short-term intervals
and can involve substantial changes in workforce needs as
businesses try to address shifting markets. These changes
have disrupted the traditional employer-employee
relationship of long-term employment with one employer.
This fundamental shift requires challenging some
commonly-held assumptions about the roles and
responsibilities of both employers and employees.
Historically, employers were the primary source
of employee training. Formalized internships and
apprenticeships, or extended on-the-job training, provided
employers with workers trained to a certain set of skills
within a specific corporate culture. Today, rapid advances
in technology require a sophisticated set of technical
skills that may change with each customer or contract.
In turn, globalization places pressure on profitability and
diminishes employers’ ability and willingness to provide
in-depth training that may be quickly obsolete or enable
mobile employees to trade their skills elsewhere.
Further, Cappelli continued, our educational system,
which encourages a four-year college degree as a measure

of qualification, is out of synch in an environment that
increasingly requires life-long learning. While most
employers agree that some post-secondary training or
credential is necessary, Cappelli challenged common
aspirations for a bachelor’s degree.
Today, there is preference for employees with work
experience, as indicated by the National Skills Coalition
(NSC) data, but few opportunities to gain such know-how
prior to entering the job market. These factors contribute
to the perceived difficulties that employers have recently
reported in finding employees well-suited to available job
openings. Employer needs are complex and ever-changing
and workforce development professionals must respond to
this fast pace without full information or data.
Cappelli concluded that little evidence exists to indicate
a skills gap. Rather, employers are unable to effectively
plan for the long term in a rapidly changing economic
environment, but seek experienced workers when their
employment needs change. Instead of devoting resources
to internal training programs, they tend to rely on
external agencies, such as educational institutions, to
provide workers with the appropriate skills. Educational
institutions, on the other hand, have neither sufficient
information about future work force needs nor the
support from employers to provide students with on-thejob exposure to work and skill development.

What have we learned?
In many ways, local agencies involved in workforce
planning are caught in the middle between the needs
of employers and the ability of schools and training
providers to deliver qualified candidates suited for
immediate employment. Effective planning for future
workforce needs is vital for overall regional economic
prosperity. However, compiling and analyzing data can
be difficult for workforce agencies, especially those with
limited staff and resources.
Years of experience in designing education and training
efforts have yielded many examples of effective or
promising approaches to address both short- and longterm workforce needs. Examples of four of the strategies
shared at Future Focus: Preparing for Workforce 2020 are
highlighted below. Many others are operating at the
local, regional, and state levels, and are being adopted or
adapted by workforce systems seeking to improve their
outcomes.

ProfitWise News and Views Issue 4 | 2015
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Using data for workforce planning and policy
Data tools are available to help policymakers use
information to better align workforce and education
programs with employer skill needs. The NSC is
addressing this need through its State Workforce and
Education Alignment Project.10 Known as SWEAP,
the program uses data to inform state and local
leaders about how individuals can advance to higherpaying employment. The NSC has also launched a
‘Skills2Compete’ campaign that connects employers with
community colleges, state agencies, labor, and training
advocates to promote middle-skill job opportunities
through a two-year targeted curriculum.11 Funded by the
Joyce Foundation, campaigns in several states, including
Indiana, have been supported through this initiative.
Another approach is found in states that use data to identify
industry clusters of strategic economic importance and
target workforce development resources to those highgrowth areas. The Michigan Workforce Development
Agency uses this approach in agriculture, energy, health
care, information technology, and manufacturing.12

Developing educational models
Integrating academic and workforce preparation can
prepare high school students with a range of skills needed
in high performance work places. Brooklyn’s Pathways
in Technology Early College High School is a six-year,
jobs-focused public high school that combines secondary
and postsecondary education with business training.13
Organizations, such as the Wisconsin Regional Training
Partnership (WRTP) that provides apprentice opportunities
to become Industrial Manufacturing Technicians,
are another example.14 In addition to more effective
coordination between employers and workers, WRTP’s
strategies have increased participation from both minorities
and women in the skilled trades. Although apprenticeship
models have a long and successful history in Europe, they
have enjoyed resurgence in the U.S. aided in part by the
U.S. Department of Labor’s $100 million investment in
high quality registered apprenticeship programs.15

Accelerating preparation for low-skilled adult workers
Many adult learners who need to move quickly through
school and into jobs that provide income find success
in programs integrating basic education with skills
training. Washington State’s Integrated Basic Education
and Skills Training pairs a professional/technical with a

basic skills instructor in the classroom to provide highly
contextualized education that is relevant to adult learners.16
In a similar vein, bridge programs help adult learners
without a high school diploma move from adult education
to postsecondary education, training, and employment.
Bridge programs, such as the five-state ‘Shifting Gears’
initiative, combine contextualized instruction with career
awareness and career development, as well as transition
services such as financial, academic, or personal support.17

Assisting the chronically unemployed
As labor markets continue to tighten, workforce agencies
see non-traditional pools of potential workers as part
of the solution. Nonprofit workforce partners like the
National Transitional Jobs Network are developing
strategies to connect populations with multiple barriers
to employment, such as the homeless and ex-offenders,
to meaningful work.18 Operating under the Heartland
Alliance, the organization defines transitional jobs as
those that offer time-limited, subsidized jobs in supportive
settings. Recent research has shown that such initiatives
can succeed in moving people into the workforce, and for
every dollar invested, nearly $4 are returned in benefits to
the community and taxpayers.19

Conclusion
Four broad themes emerged from the February 2015 Future
Focus: Preparing for Workforce 2020 conference, which
suggest policymakers and other parties seeking to develop
and scale their workforce efforts should:
• Take to heart the WIOA requirement to engage local
workforce boards in understanding and translating
local workforce information. Although available
data are imperfect, when used thoughtfully to frame
constructive conversations between employers and
education and training providers, they can improve
the effectiveness with which scarce workforce
resources are deployed.
• Look outside one’s region for ideas and models of
what is working to strengthen workforce systems.
This one-day conference was only one of many
opportunities to learn about promising and effective
practices offered by the workforce development
community. Countless other practices are being used
throughout the U.S., and in mature economies in
other countries.

ProfitWise News and Views Issue 4 | 2015
— 29 —

• Expand the pool of workers by targeting populations
that have been historically underrepresented in
workforce development efforts. Structural skills gaps
may be addressed in part by removing barriers to
employment and identifying untapped talent.

This concept may be reframed as a challenge to workforce
leaders willing to transform their local, regional, or state
workforce system by significantly improving performance
while reducing the cost of outcomes through scalable and
financially sustainable inventions.

• Involve financial institutions in funding workforce
development programs. Funding such programs,
especially those that target low- and moderate-income
residents and other underserved populations, is
encouraged under the Community Reinvestment Act.
Examples may be found in small business development,
financial education, partnerships with intermediaries,
and other activities that impact job creation or
employability.

In their report “Managing the Talent Pipeline: A New
Approach to Closing the Skills Gap,” the U.S. Chamber
of Commerce Foundation suggests a disruptive innovation
approach. By positioning employers as end-users (the
customers) in the talent supply chain, new partnerships
with education and workforce providers will be needed that
could represent game-changing workforce results.21 This
is one example of the innovation and rethinking needed
to complement effective but incremental approaches to
developing cost-effective and adaptive workforce systems.

Yet, the authors question whether these actions are enough
to meet our nation’s varied and ever-changing workforce
needs. With U.S. employers worried about losing our
competitive advantage and workers desperate for access to
living wage jobs, we must consider fundamental changes in
workforce systems that do not yet (fully) meet the needs of
employers and workers.
To this end, Clayton Christensen’s concept of “disruptive
innovation” remains a powerful and relevant approach for
reinventing workforce development policy and practice.20
Disruptive innovation is a process by which a simpler, “good
enough” solution is introduced into a market and succeeds,
eventually to the point of displacing its competitors.
In the context of creating social change, Christensen
also offers a variation of his disruptive innovation model.
“Catalytic innovation” provides low cost, simple, but useful
services for people who are overlooked by traditional
social sector organizations. Christensen and his colleagues
describe five qualities of catalytic innovators:
1. They create systemic social change through scaling and
replication.
2. They meet a need that is either over-served (as a result of
overly complex existing solutions) or not served at all.
3. They offer simpler and less costly products and services
that are considered ‘good enough.’
4. They generate financial human, or intellectual resources
that are initially unattractive to competitors.
5. Their business model may be considered unprofitable or
unattractive by existing players.

The new federal Workforce Innovation and Opportunities
Act sets the stage for workforce boards to assume or delegate
the role of catalytic innovator.22 Among the provisions of
this legislation is strengthening the governing bodies that
establish state, regional, and local workforce investment
priorities. Workforce boards, which continue to be led by
a majority of private sector representatives, are mandated to
oversee workforce planning that:
• Uses economic and labor market information to ensure
local strategies are based on knowledge of economic
opportunities and the workforce needs of the region.
• Analyzes workforce development activities in the
region, including the strengths and weaknesses of
services needed.
• Strategizes to improve access to services that lead to a
recognized post-secondary credential.
• Facilitates the development of career pathways.
• Coordinates local workforce activities with regional
economic development activities.
• Promotes entrepreneurial
microenterprise services.

skills

training

and

• Ensures continuous improvement of eligible training
providers.
By embracing the concept of catalytic innovation and a
relentless focus on what has proven effective, the U.S. will
be better prepared to meet the workforce challenges of
2020.

ProfitWise News and Views Issue 4 | 2015
— 30 —

Workforce resources from around the Federal Reserve System
Below is a sampling of research and discussions on the topic of workforce development that are taking place around the Federal
Reserve System. These and more can be found by using the search function at www.FedCommunities.org.

From the Chicago Fed
Community Colleges and Industry: How Partnerships Address the Skills Gap provides an overview of Seventh District collaborative
program. Available at: https://www.chicagofed.org/publications/profitwise-news-and-views/2013/pnv-nov2013
From Classroom to Career: An Overview of Current Workforce Development Trends, Issues, and Initiatives explores factors affecting
the connection between school and work. Available at: https://www.chicagofed.org/publications/profitwise-news-and-views/2014/
pnv-fall2014

Seventh District Workforce Development Programs that Serve Marginalized and Disadvantaged Populations discusses workforce
development programs within the Seventh District with special attention paid to those programs targeting underserved
populations. Available at: https://www.chicagofed.org/publications/profitwise-news-and-views/2015/pnv-issue2-workforcedevelopment-programs

From the Cleveland Fed
Demystifying the Workforce Innovation and Opportunity Act (WIOA) for Community and Economic Developers: A Primer
Effective July 1, 2015, provisions of the Workforce Innovation and Opportunity Act, or WIOA, went into effect. What changes
has this legislation prompted, and how might they help improve outcomes for workers, employers, and communities alike? In
this primer, Senior Policy Analyst Joseph Ott highlights key reforms of the WIOA along with implications for policymakers
and practitioners. Available at: https://www.clevelandfed.org/newsroom%20and%20events/publications/special%20reports/sr%20
20150902%20workforce%20innovation%20and%20opportunity%20act.

From the Federal Reserves of Atlanta and Kansas City
Transforming U.S. Workforce Development Policies for the 21st Century explores how new policies and practices can meet the
changing needs of workers, businesses, and their communities. Produced in partnership by the Federal Reserve Banks of Atlanta
and Kansas City, and the John J. Heldrich Center for Workforce Development at Rutgers University, this edited volume presents
contributions from more than 65 leading scholars and practitioners engaged in workforce development. Download Transforming
U.S. Workforce Development Policies for the 21st Century. Available at: https://www.kansascityfed.org/~/media/files/publicat/
community/workforce/transformingworkforcedevelopment/book/transformingworkforcedevelopmentpolicies.pdf

View related resources from the Transforming U.S. Workforce Development Policies for the 21st Century Conference. Available
at: https://www.kansascityfed.org/publications/community/transformworkforce/resources

From the Richmond Fed
Education, Innovation and Economic Growth. A speech by Jeffrey M. Lacker, president, Federal Reserve Bank of Richmond.
Available at: https://www.richmondfed.org/press_room/speeches/president_jeff_lacker/2015/lacker_speech_20150210

From the Minneapolis Fed
From preschool to high school, programs aim to close Minnesota’s STEM achievement gap. Hands-on educational experiences
are exposing low-income students in Minnesota to the concepts and opportunities found in the science, technology, engineering,
and mathematics fields. Available at: https://www.minneapolisfed.org/publications/community-dividend/from-preschool-to-highschool-programs-aim-to-close-minnesotas-stem-achievement-gap

ProfitWise News and Views Issue 4 | 2015
— 31 —

Notes

20. Christensen, Clayton M., C.M., Baumann, H., Ruggles, R., and Sadtler, T.M., 2006,
“Disruptive innovation for social change,” Harvard Business Review, December.

1. Cappelli, Peter, 2014, “Skill gaps, skill shortages and skill mismatches: Evidence for
the U.S.,” Cambridge, MA: National Bureau of Economic Research, August, available
at http://www.nber.org/papers/w20382.
2. See: Innovation Strategies for a New System of Workforce Development and Lifelong
Learning. Council for Adult and Experiential Learning (CAEL), November 2008,
available at http://www.cael.org/pdfs/101_innovationstrategies1.

21. U.S. Chamber of Commerce Foundation (n.d.), Managing the Talent Pipeline: A New
Approach to Closing the Skills Gap, available at http://www.uschamberfoundation.
org/talent-pipeline-management-white-paper.
22. The Workforce Innovation and Opportunity Act, available at http://edworkforce.
house.gov/uploadedfiles/workforce_innovation_and_opportunity_act_-_one_
pager.pdf.

3. Northern Illinois University Center for Governmental Studies, available at
www.cgs.niu.edu.

Biographies

4. The Workforce Innovation and Opportunity Act: Investing in America’s
competitiveness, available at http://edworkforce.house.gov/uploadedfiles/
workforce_innovation_and_opportunity_act_-_one_pager.pdf.

Diana Robinson is director of the Center for Governmental
Studies at Northern Illinois University.

5. Christensen, C. M., H. Baumann, R. Ruggles, and T. M. Sadtler, 2006, “Disruptive
Innovation for Social Change,” Harvard Business Review, Volume 84, Issue 12,
pp. 94-101.

Norman Walzer is senior research scholar at the Center for
Governmental Studies at Northern Illinois University.

6. Washington, DC: U.S. Bureau of Labor Statistics, 2013, “Occupational Employment
Projections to 2013,” Monthly Labor Review, December, retrieved from http://www.
bls.gov/opub/mlr/2013/article/occupational-employment-projections-to-2022.
htm.

Jason Keller is the economic development and Illinois state
director in the Community Development and Policy
Studies Division of the Federal Reserve Bank of Chicago.

7. Bureau of Labor Statistics.

The authors thank Andy Blanke, research associate, CGS,
for assistance in data compilation and analysis.

8. Living Wage Calculator, available at http://livingwage.mit.edu/.
9. See http://www.nationalskillscoalition.org/news/blog/targeting-our-middle-skilleconomy-state-by-state-snapshots. Middle-skilled jobs are defined by the NSC as
those “which require education beyond high school but not a four-year degree,”
plus some of the ‘intangible’ qualifications of professional experience and on-thejob training.
10. National Skills Coalition State Workforce and Education Alignment Project (SWEAP),
available at http://www.nationalskillscoalition.org/state-policy/state-workforceand-education-alignment-project.
11. Skills2Compete – The National Skills Coalition. Overview available at http://www.
joycefdn.org/skills2compete-the-national-skills-coalition/.
12. Michigan Workforce Development Agency, available at http://www.michigan.gov/
wda.
13. Pathways in Technology Early College High School, available at http://www.
ptechnyc.org/site/default.aspx?PageID=1.
14. Wisconsin Regional Training Partnership, available at http://www.wrtp.org/.
15. U.S. Department of Labor American Apprenticeship Grants, available at http://www.
dol.gov/apprenticeship/grants.htm.
16. Illinois Postsecondary Career & Technical Education Integrated Career and Academic
Preparation System, available at http://64.107.108.153/cte/index.php/grantsinitiatives/icaps.
17. Illinois Community College Board Shifting Gears, available at https://www.iccb.org/
shifting_gears.html.
18. Heartland Alliance National Initiatives on Poverty and Economic Opportunity,
available at http://www.heartlandalliance.org/nationalinitiatives/.
19. Redcross, C., et. al., 2012, “More than a job: Final results from the evaluation of the
Center for Employment Opportunities (CEO) Transitional Jobs Program,” January,
New York: MDRC, January, available at http://www.mdrc.org/publication/more-job.

ProfitWise News and Views Issue 4 | 2015
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An analysis of African American
interstate migration to Iowa
By Marva Williams
There are many motivations for family moves to other
states. New jobs, lower crime rates, and better schools are
a few. A common rumor in Iowa is that many low-income
blacks are relocating to the state from communities in
Illinois, Wisconsin, and elsewhere, to take advantage of
the state’s generous welfare benefits. This article attempts
to explore that assumption by clarifying who is moving to
Iowa and why. The conclusion, based on census data and
a brief review of the literature, is that although perception
belies reality, the reality is more nuanced than one might
expect.
Demographic and economic trends show contrast
between Iowa and the rest of the country. First, it is
much less diverse. Whites make up over 90 percent of
the population, blacks are only 3.4 percent, and Latinos
are less than 6 percent. Second, Iowa also appears to be
doing better economically. It has a smaller percentage of
families with incomes below the poverty line and a lower
unemployment rate. Third, the population of Iowa is
growing much more slowly than the population of the
country. From 1970 to 2010 population growth was 7.86
percent compared to a national rate of 51.93 percent.
Within this context of relative economic prosperity
shadowed by population loss and lack of diversity, Iowa
offers higher welfare and other benefits than nearby states.

Chart 1. Average state benefits
Rank/average benefit per person

16 / $16,241
35 / $12,812
11 / $17,760

31 / $13,103

21 / $14,229

Source: Berman, Jacob, 2014, “Differences in State Safety Net Spending,”
Midwest Economy, Federal Reserve Bank of Chicago, blog, April 21,
available at http://midwest.chicagofedblogs.org/archives/2014/04/
jacobs_blog.html.

ProfitWise News and Views Issue 4 | 2015
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According to a recent Federal Reserve Bank of Chicago
study, Iowa ranks 11th of 50 states for average benefit per
person. It ranks higher than Illinois, Indiana, Michigan,
and Wisconsin – the other states in the Federal Reserve’s
Seventh District (see chart 1). The relevant programs
include Medicaid, Supplemental Security Income (SSI),
Unemployment Insurance, Temporary Assistance for
Needy Families (TANF), and other programs in which
states have some discretion over the distribution of
benefits (Berman, 2014).
However, research on whether households migrate to states
with more generous social programs is inconclusive, due in
part to the complexity of studying migration, identifying
suitable data, or isolating comparable control groups –
e.g., see Gelbach (2004) and McKinnish (2005) – and at
times contradictory; see Meyers (2000) and Zimmerman
(1999). Other studies, including Allard and Danziger
(2000); Levine and Zimmerman (1999); Schram, Nitz,
and Krueger (1998); and Frey, Kiaw, Xie, and Carlson
(1996), found that higher levels of welfare payments had
little or no impact on interstate migration. Bailey (2005)
documented that welfare benefits do impact where people
choose to live; however, other factors, like family ties,
have a stronger relationship to housing location decisions.

Chart 2. Percent of migrants from U.S.
to Seventh District states, 2007-2011

2.0%

1.5%

1.9%
1.5%

1.0%

1.1%
.8%

.5%

0%

Iowa

Illinois

Indiana

Michigan

Source: 2007-2011 American Community Survey.

Domestic migration to Iowa
Iowa has the smallest population of the five states in the
Seventh District. With a population of 3,046,857 in 2010,
Iowa is half the size of the next smallest state, Wisconsin,
and one-quarter the size of the District’s most populous
state, Illinois. However, the rate of migration to Iowa of
people from other parts of the United States was higher
than the rates of domestic migration to other states in
the Seventh District (see chart 2). From 2007 to 2011, 2
percent of new residents moved to Iowa from other parts
of the United States, compared to rates of 1.9 percent to
0.8 percent to other Seventh District States. However, the
remaining Seventh District states had larger numbers of
new arrivals from other states (2014 American Community
Survey).
Table 1 compares migrants to Iowa with Iowa’s general
population. Migrants to the state tended to be U.S.
citizens, younger and much more diverse than its general
population: over 17 percent of migrants were Latino and
almost 5.8 percent were black, compared to 3.3 and 1.6
percent, respectively, in the general population. However,
following the notion of migration to opportunity, the
unemployment rate among migrants was double that of the
general population and the annual income of migrants was
much lower than the general population. The educational
attainment between migrants and residents is fairly similar.

2.5%

2.0%

To determine the extent to which lower-income blacks
are, in fact, migrating to Iowa, we analyzed the U.S.
Census Bureau’s American Community Survey (ACS)
data collected from 2007 to 2011. ACS data is designed to
ensure good geographic representation and therefore is an
accurate reflection of local population trends. Using this
data, which included almost 155,000 records, migrants
were compared from other states to the general population
in Iowa. Then, because Iowa has a significant number of
migrating college and graduate school students, the analysis
was extended to non-student migrants, and finally to the
demographics of non-student black migrants to Iowa.

Wisconsin

The major difference between the general population and
migrants was whether they were enrolled in college or not.
As documented in table 2, migrants were three and a half
times more likely to be current college or graduate school
students than the general population. The relatively large
proportion of college and graduate students that migrated
to Iowa makes it useful to analyze the characteristics of
those migrants that are not students.

ProfitWise News and Views Issue 4 | 2015
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Table 1. Demographics of general population and migrants to Iowa, 2007-2011
General Population

All Migrants

154,878

3,113

98.3%

95.5%

1.7%

4.5%

22.5%

20.4%

18-24

8.2%

31.3%

25-44

22.2%

29.5%

45-65

29.5%

13.9%

Age 66+

17.5%

5.0%

White

94.6%

84.9%

Black

1.6%

5.8%

Ethnicity

Latino

3.3%

17.1%

Marital status

Married

47.2%

27.1%

Widowed

6.5%

2.3%

Divorced

7.9%

8.4%

Separated

0.8%

2.2%

Never married

37.6%

60.1%

Yes

23.4%

30.7%

No

73.7%

69.8%

Grade 6 and below

1.7%

2.0%

Grades 7-9

3.8%

4.0%

Grades 10-12

3.4%

5.0%

High school diploma

36.8%

31.1%

Some college

21.3%

23.1%

College and graduate school

32.2%

33.3%

Current students

College or graduate school

7.9%

27.9%

Employment

Employed

95.1%

85.9%

Unemployed

4.7%

13.4%

Not in the labor force

0.1%

0.7%

$24,000

$11,000

Number
Citizenship

Citizen
Not a citizen

Age

Race

Children under age 18 living in household
Educational attainment (individuals 25 and over)

Adult personal income

Under 18

Median income

Source: 2007-2011 American Community Survey.

ProfitWise News and Views Issue 4 | 2015
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Table 2. Demographics of general population, migrants and non-student migrants to Iowa, 2007-2011
Number
Citizenship

Citizen
Not a citizen

Age

All Migrants

Non-student
Migrants

154,878

3,113

2,332

98.3%

95.5%

95.1%

1.7%

4.5%

4.9%

22.5%

20.4%

26.7%

18-24

8.2%

31.3%

14.2%

25-44

22.2%

29.5%

34.4%

45-65

29.5%

13.9%

18.0%

Age 66+

17.5%

5.0%

6.7%

White

94.6%

84.9%

84.8%

Black

1.6%

5.8%

5.7%

Ethnicity

Latino

3.3%

17.0%

9.0%

Marital status

Married

47.2%

27.1%

32.8%

Widowed

6.5%

2.3%

3.0%

Divorced

7.9%

8.4%

10.6%

Separated

0.8%

2.2%

2.7%

Never married

37.6%

60.1

50.9%

Yes

23.3%

30.3%

32.4%

No

73.7%

69.7%

67.6%

Grade 6 and below

1.3%

2.0%

3.5%

Grades 7-9

3.7%

4.0%

5.5%

Race

Children under age 18 living in household
Adult educational attainment
(individuals 25 and over)

Under 18

Iowa’s General
Population

Grades 10-12

3.4%

5.0%

8.8%

High school graduate

36.8%

31.1%

30.7%

Some college

21.3%

23.1%

25.9%

College and graduate school

32.2%

33.3%

22.7%

Current university students

College or graduate school

7.9%

27.9%

0.00%

Adult employment

Employed

95.1%

85.9%

86.9%

Unemployed

4.7%

13.4%

12.3%

Not in the labor force

0.1%

0.7%

0.6%

$24,000

$11,000

$16,100

Adult personal income

Median income

Source: 2007-2011 American Community Survey.

ProfitWise News and Views Issue 4 | 2015
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Table 3. Demographics of black non-students migrants in Iowa, 2007-2011
Number
Citizenship

Citizen
Not a citizen

Age

All Non-student
Migrants

Black Non-student
Migrants

154,878

2,332

131

98.3%

95.1%

92.4%

1.7%

4.9%

7.4%

22.5%

26.7%

42.8%

18-24

8.2%

14.2%

17.6%

25-44

22.2%

34.4%

25.2%

45-65

29.5%

18.0%

13.7%

Age 66+

17.5%

6.7%

0.8%

White

94.6%

84.8%

0.0%

Black

1.6%

5.7%

100.0%

Ethnicity

Latino

3.3%

9.0%

0.0%

Marital status

Married

47.2%

32.8%

26.7%

Widowed

6.5%

3.0%

1.3%

Divorced

7.9%

10.6%

14.7%

Separated

0.8%

2.7%

6.7%

Never married

37.6%

50.9%

50.7%

Yes

23.3%

32.4%

51.7%

No

73.7%

67.6%

48.3%

Grade 6 and below

1.3%

3.5%

4.9%

Grades 7-9

3.7%

5.5%

6.4%

Race

Children under age 18 living in household
Adult educational attainment
(individuals 25 and over)

Under 18

General Population

Grades 10-12

4.7%

11.7%

16.6%

High school graduate

36.8%

30.7%

30.0%

Some college

21.3%

25.9%

25.9%

College and graduate school

32.2%

22.7%

16.0%

Current students

College or graduate school

7.9%

0.0%

0.0%

Adult employment

Employed

95.1%

86.9%

56.8%

Unemployed

4.7%

12.3%

12.2%

Not in the labor force

0.1%

0.6%

31.1%

$24,000

$16,100

$7,200

Adult personal income

Median income

Source: 2007-2011 American Community Survey.

ProfitWise News and Views Issue 4 | 2015
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Non-student migrants to Iowa
There were 2,332 migrants to Iowa between 2007 and
2011 who were not college students. Table 2 shows an
overwhelming majority of this group were U.S. citizens
(95 percent). The non-student migrants are older than
migrants in aggregate, but still younger than Iowa’s general
population. Non-student migrants were more racially and
ethnically diverse than Iowa residents as a whole. Further,
non-student migrants have a lower percentage of adults
who are married. The percent of households with children
under age 18 is highest for non-student migrants than
for the general population. Non-student migrants have
a lower percentage of college graduates than the other
groups, and their median income is about 70 percent of
the median income of the general population.

Table 4. TANF usage by Iowa residents
and migrants, 2007-2011
TANF Recipients

In addition to having lower incomes, black migrants
to Iowa who were not college students also had higher
rates of participation in Temporary Assistance to Needy
Families (TANF). The participation rate of non-student
black migrants was seven times that of the general public
and almost three times the rate of non-student migrants
(see table 4). However, this calculates to approximately
12 people out of 131 total non-student black migrants.

1.3%

Non-student Migrants

3.2%

Non-student Black Migrants

9.3%

Source: 2007-2011 American Community Survey

Table 5. Migrating black non-students to Iowa:
State of origin, 2007-2011

Black non-student migrants to Iowa
Table 3 provides the demographic characteristics of black
non-student migrants to Iowa. There were 131 black nonstudent migrants included in the survey data. Most were
born in the United States or were naturalized citizens.
Over 40 percent of black non-student migrants were
under age 18 and about 25 percent were adults between
the ages of 25 and 44. About half of the adults had no
children and their college graduation rate is half of the
rate of the general population. The personal incomes
of this group were also fairly low: half had personal
incomes below $7,200, which is one-third of the median
income of all Iowans. About a third of non-student black
migrants were not in the labor force, and over 12 percent
were unemployed. Although these percentages are much
higher than what is found in the general population,
the actual numbers of people represented is very small.
Ultimately, the number of adults who are black nonstudents, and also not participating in the labor force, is
approximately 25.

General Population

Percent

Number

llinois

19.1%

25

Nebraska

11.5%

15

Georgia

6.1%

8

North Dakota

6.1%

8

Missouri

5.3%

7

North Carolina

4.6%

6

Indiana

3.8%

5

Michigan

3.8%

5

Minnesota

3.8%

5

Mississippi

3.8%

5

Ohio

3.8%

5

Other

28.3%

37

Source: 2007-2011 American Community data.

Table 5 shows the states from which non-student blacks
migrated. Although Illinois had the highest percentage
of non-student black migrants to Iowa, it accounted for
less than 20 percent of the migrants from this group. The
second highest state with non-student black migrants was
Nebraska, followed by several southern states. In total,
Seventh District states, including Wisconsin, provided
only 28 percent of all black non-student migrants to Iowa.
Again, when these percentages are converted to numbers,
the impact of these trends is minimal.

ProfitWise News and Views Issue 4 | 2015
— 38 —

Conclusion

References

It appears that lower-income blacks are moving to Iowa in
very small numbers. Less than 6 percent of all migrants to
Iowa from 2007 to 2011 were black and only 0.4 percent
of migrants were non-student blacks. These new residents
demonstrated economic and domestic challenges typical
of migrants seeking better opportunities for their families:
lower personal incomes; lower educational attainment
levels and higher levels of single parents. This would
appear to also drive higher levels of welfare (TANF)
participation and lower levels of labor force participation.

1. Allard, Scott, and Sheldon Danziger, 2000, “Welfare magnets: Myth or reality?”
Journal of Politics, Vol. 62, No. 2, May, pp. 350-368, available at http://www.jstor.
org/stable/pdfplus/2647678.pdf?&acceptTC=true&jpdConfirm=true.

Like many of its neighboring states, in-migration to Iowa
is vital to its economic future providing a much needed
workforce to fuel business attraction and other aspects of
economic growth. Although very small in number, the
economic participation rates (as indicated by labor force
participation) are concerning from a policy standpoint.
Ensuring that all new arrivals – regardless of origin or
profile – are able to engage in opportunities for economic
advancement will truly fulfill the intent and promise of
migration.

2. Bailey, Michael A., 2005, “Welfare and the multifaceted decision to move,” American
Political Science Review, Vol. 99, No. 1, February, pp. 125-135, available at http://
www.jstor.org/stable/30038923?seq.
3. Berman, Jacob, 2014, “Differences in state safety net spending,” Midwest Economy,
Federal Reserve Bank of Chicago, blog, April 21, available at http://midwest.
chicagofedblogs.org/archives/2014/04/jacobs_blog.html.
4. Caputo, Angela, 2014, “Chicago lags behind in meeting low-income housing needs,”
Chicago Reporter, March 4, available at http://chicagoreporter.com/chicago-lagsbehind-meeting-low-income-housing-needs/.
5. Enchautegui, Maria E., 1997, “Welfare payments and other economic determinants
of female migration,” Journal of Labor Economics, Vol. 15, No. 3, July, pp. 529-554,
available at http://www.jstor.org/stable/10.1086/209871.
6. Frey, William H., Kao-Lee Liaw, Yu Xie, and Marcia J. Carlson, 1996, “Interstate
migration of US poverty population: Immigration ‘Pushes’ and welfare magnet
‘Pulls’,” Population and Environment: A Journal of Interdisciplinary Studies, Vol.
17, No. 6, July, pp. 491-538, available at http://www.frey-demographer.org/
reports/R-1996-4_InterstateMigration.pdf.
7. Gelbach, Jonah B., 2004, “Migration, the life cycle, and state benefits: How low is
the bottom?,” Journal of Political Economy, Vol. 112, No. 5, pp. 1091-1130, available at
http://www.econ.brown.edu/fac/Brian_Knight/gelbach.pdf.

Biography

8. Kaestner, Robert, Neeraj Kaushal, and Gregg Van Ryzin, 2001, “Migration
Consequences of Welfare Reform,” the National Bureau of Economic Research, NBER
Working Paper No. 8560, October, available at http://www.nber.org/papers/w8560.

Marva Williams is the economic development and Iowa state
director in the Community Development and Policy
Studies Division of the Federal Reserve Bank of Chicago.

9. Levine, Phillip B., and David J. Zimmerman, 1999, “An empirical analysis of the
welfare magnet debate using the NLSY,” Journal of Population Economics, Vol. 12,
No. 3, pp. 391-409, available at http://www.nber.org/papers/w5264.
10. McKinnish, Terra, 2005, “Importing the poor: Welfare magnetism and cross-border
welfare migration,” Journal of Human Resources, Vol. 40, No.1, December, pp. 57-76,
available at http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3177304/.
11. McKinnish, Terra, 2007, “Welfare-induced migration at state borders: New evidence
from micro-data,” Journal of Public Economics, Vol. 91, Issues 3–4, April, pp. 437–
450, available at http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3177299/.
12. Meyer, Bruce D., 2000, “Do the Poor Move to Receive Higher Welfare Benefits?,”
Northwestern University and NBER working paper, unpublished, available at
http://128.135.46.110/sites/default/files/meyer_do_the_poor.pdf.
13. Schram, Sandford, Lawrence Nitz, and Gary Krueger, 1998, “Without cause or effect:
Reconsidering welfare migration as a policy problem,” American Journal of Political
Science, Vol. 42, No. 1, January, pp. 210-230, available at http://www.jstor.org/
stable/pdfplus/2991753.pdf?&acceptTC=true&jpdConfirm=true.

ProfitWise News and Views Issue 4 | 2015
— 39 —

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