Ed Morrison

Purdue Center for Regional Development

West Lafayette, IN
December 3, 2009

MEASURING THE IMPACTS OF COMMUNITY

RENEWAL INTERNATIONAL

This note explores how to measure the economic impacts of Community

Renewal International's model of neighborhood renewal.

Background
Community Renewal International (CRI) has developed a new model for
building prosperity within poor inner-city neighborhoods. This model focuses
on the development of supportive networks of "intentional relationships".
The model guides the development of these relationships along the critical
dimensions of a healthy community.

The CRI model of neighborhood transformation is closely allied to a similar

approach that we have been developing at the Purdue Center for Regional
Development for regional economic transformation. Our model relies on the
development of open networks.

We focus on five dimensions of regional transformation: 1) building

brainpower with 21st-century skills; 2) translating brain power into wealth
through innovation and entrepreneurship networks; 3) developing quality,
connected physical spaces; 4) creating powerful regional narratives through
effective storytelling; and 5) developing democratic, collaborative leadership
skills. We call this approach Open Source Economic Development. To guide
the development of complex projects within these open networks, we've
developed a new approach to strategy, called Strategic Doing. Unlike
strategic planning, which assumes you can you operate through a
hierarchical organization to develop and implement strategy, Strategic Doing
guides development of complex projects in open networks.

These two models of economic transformation -- one developed by

Community Renewal International, the other developed at the Purdue Center
for Regional Development -- are closely aligned. They both represent a new
generation of policy strategy based on understanding our economy as a
series of networks embedded in other networks. This new perspective carries
profound impacts for the study of economics, as well as public policy for

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community development, education transformation, economic development,
and workforce development.1

In the past, policy strategies for community development, economic

development and workforce development have focused on solving problems.
Federal and state level policies have been isolated. This approach makes
sense if you view the economy as a mechanical system that can be "fixed".
So, not surprisingly, public policy for community and regional development is
highly compartmentalized and fragmented. In the case of economic
development, there are over 180 programs scattered across nine federal
departments and five independent federal agencies. This complex maze of
programs evolved over five decades, as the federal government attempted
to solve isolated problems.2

Network-based approaches take a different view. These models see

economies at the community and regional level as open networks that can
be intentionally strengthened and focused. They call for a new generation of
state and federal policy that is more flexible and adaptive, but no less
accountable.

Measuring the impacts of Community Renewal International: A

Framework
CRI's approach to transforming neighborhood economies creates two
broad categories of impacts: reducing social costs and increasing
neighborhood wealth.

Reducing social costs

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

1 Beinhocker, E. D., 2006. The Origin of Wealth: Evolution, Complexity, and

the Radical Remaking of Economics . Boston, Mass.: Harvard Business School
Press
2 Mark Drabenstott, 2009. Why is Targeted Regional Economic Development
Important in Today's Policy Setting. [online] Available from:
http://nercrd.psu.edu/TRED/DrabenstottChapter.pdf [accessed December 3,
2009]

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Increasing community wealth

Two factors drive the increase in neighborhood wealth: higher levels of

educational attainment and new business development. The connection
between higher levels of educational attainment and higher incomes is well-
established. As we move toward a more knowledge-based economy, income
levels of high school dropouts and high school graduates have been
declining, while the income levels of people with postsecondary education
have been increasing.

New business activity also increases the wealth of a neighborhood. Three

factors drive this process. New and expanding businesses trading with
customers outside the neighborhood generate income for the neighborhood.

Wealth also increases within a neighborhood when neighborhood

residents buy goods and services from each other. Economists call this factor
the "multiplier" which measures the impact of a new dollar coming into the
economy. Vibrant economies have higher multipliers. Finally, wealth is
increased within the neighborhood when businesses "plug the leaks". So, for
example, a larger company, by choosing a local supplier, reduces the flow of
money outside the neighborhood.

Measuring the impacts of Community Renewal International:

Some Specifics
We can use a variety of
metrics to measure CRI's
impacts. Here are several:

• Reducing teenage
pregnancy

• Reducing low
birthweight babies

• Increasing early
childhood education

• Improving 3d grade
literacy

• Reducing high school dropouts

• Increasing educational attainment

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 • Increasing business development

Reducing teenage pregnancy.-- An analysis from the National Campaign

to Prevent Teen Pregnancy shows that teen childbearing (teens 19 and
younger) in Louisiana cost taxpayers (federal, state, and local) at least $165
million in 2004.Of the total 2004 teen childbearing costs in Louisiana, 49%
were federal costs and 51% were state and local costs.

In Louisiana, in 2004, annual taxpayer costs associated with children born

to teen mothers included: $31 million for public health care (Medicaid and
SCHIP); $21 million for child welfare; $34 million for incarceration; and $59
million in lost tax revenue, due to decreased earnings and spending.

Reducing low birthweight babies.-- Each year, about 8% of infants are

born at low or very low birth weight. These infants impose higher medical
care costs and suffer long-term health problems such as cerebral palsy,
mental retardation, social and learning difficulties. The average cost of
medical care for a premature or low birth-weight baby for its first year of life
is about $49,000, according to the March of Dimes Foundation.

Increasing early childhood education.-- High-quality preschool programs

are emerging as a top priority for leading business groups. According to the
business led Committee for Economic Development, high-quality preschool
increases the long-term employment level by states by more than twice as
much as traditional economic development programs. According to research
by UC Davis School of Medicine, a child's inability to pay attention when they
start school had the strongest negative effect on how they performed at the
end of high school.

Improving 3d grade literacy.-- Patterns in educational performance

emerge early in a child's life. Researchers have shown that school failure can
be predicted from third grade education performance. (Indeed, some states
use third-grade reading scores predict long-term prison populations.)
Leading-edge business groups such as the Business Council of Fairfield
County, CT are focusing on improving elementary school literacy skills.

Reducing high school dropouts.-- The national high school dropout rate is
about 30%. That means that for every 100 students entering high school in
the ninth grade, 30 will drop out by the 12th grade. High school dropouts
have become economically disabled. The average annual income for a high
school dropout in 2005 was $17,299, compared to $26,933 for a high school
graduate, a difference of $9,634. More important, the economic prospects for
high school dropouts are deteriorating rapidly.

A recent analysis in Southeast Wisconsin uncovered that only 1% of the

job openings available in the high-growth healthcare sector in that region are

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open to high school dropouts. 3 The Alliance for Excellent Education released
this month a new analysis on reducing high school dropouts in 50 large
metropolitan areas. Reducing the number of dropouts by 50% in these large
metropolitan regions would generate over $4.1 billion in additional wages
over the course of one year. High school dropouts are also far more likely to
end up in prison. On any given day, about one in every 10 young male high
school dropouts is in jail or juvenile detention, compared with one in 35
young male high school graduates

Increasing educational attainment.-- CEOs for Cities is focused on

increasing the "talent dividend" in cities by boosting educational attainment.
Increasing the four-year college attainment rate in each of the nation’s 51
largest metropolitan areas by one percentage point would be associated with
a $124 billion increase in aggregate annual personal income. So, for
example, The Columbus, OH economy would gain about $1.3 billion annually
if it could increase the number of adult residents with four-year college
degrees by 1 percentage point, to 33.5 percent.

Increasing business development.-- A number of metrics measure

increases in business activity. The Initiative for a Competitive Inner City,
founded in 1994 by Harvard Business School professor Michael E. Porter,
promote economic prosperity in America’s inner cities through private sector
engagement that leads to jobs, income and wealth creation for local
residents. ICIC has identified a number of successful strategies for inner city
businesses, including increasing local procurement from large institutions,
such as government, educational institutions and health care systems.

3 Employment and Training Institute, University of Wisconsin-Milwaukee,

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

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