Why Buy Local?

By Noa Kornbluh, Fall Fellow

One often hears the slogan “buy local,” but I was never really convinced that buying local made a significant impact.   Why buy local when local goods are often more expensive and less convenient than products from national chains?   Not too long ago I came across a powerful economic argument for buying local.  I was told that for every dollar spent at a national store 13% goes back into the local economy and if that same dollar was spent at a locally-owned business 43% returns to the community.  That is a 30% difference made with each dollar I spend, and that is a significant impact. 

This statistic comes from a study done by Civic Economics in Austin, Texas comparing the economic impact of local versus national book stores.  Civic Economics repeated a similar study in the San Francisco area.  The San Francisco study produced the same striking results, indicating that local businesses contribute much more to the local economy than national chains.  Economists found three aspects of local versus national businesses that create a profound difference in the impact on the local economy.  First, due to scale, local businesses have a higher ratio of jobs per market share.  National chains have corporate offices where they employ accountants and other administrators who work for the whole company.  Local businesses staff these jobs locally.  Second, local enterprises source more of their goods locally than national chains.  Due to convenience and scale, local business owners are more likely to buy from other local businesses instead of global suppliers.  Lastly, in local businesses a larger percentage of profits stay in the community.  Profits from small local businesses are spent by business owners in their neighborhoods on goods and services such as rent or going out to eat.  National and international businesses have stock holders located all over the world who share in profits.  Buying local may at times be more expensive or less convenient but it is an investment in the neighborhood we live in.  In the long run, the choices we make on a daily basis will shape the economic future of our community.

Women’s Initiative graduates work towards starting locally-owned businesses and in doing so they strengthen local economies.  Graduates open store fronts, provide jobs and invest in their communities.  When you purchase goods or services from a Women’s Initiative graduate you are not just supporting an incredible woman and entrepreneur, you are also investing in the local economy. 

To support both local businesses and Women’s Initiative graduates purchase tickets to the Love Local event happening at the Caine Shulte Contemporary Art Gallery in San Francisco on Friday November 16th.

The Self-Employment Assistance Program

By Loren Diesi, Financial Services Summer Fellow

As a fellow at Women’s Initiative, I have had many opportunities to broaden my understanding of microenterprise. A few weeks ago I sat in on a webinar on the topic of the Self-Employment Assistance Program (SEA). Before attending the webinar, I had no clue what this program was about. I learned that the SEA is not currently implemented in the state of California, however it is currently helping a great deal of people in our northern neighbor, Oregon.

What is the Self-Employment Assistance Program?

In Oregon, the SEA is a program that is closely related to Unemployment Benefits. The majority of claimants that apply for this program are accepted, however this program is geared towards building microenterprise and encouraging self-employment. Instead of having to look for a job while receiving unemployment, claimants are expected to work towards starting their own business full-time. Within 30 days of applying for the program, participants must submit a business plan. During the 26 week program, if a claimant is able to earn income from their starting business, they will also still receive unemployment benefits from the government allowing them to have reliable income. Throughout the program, claimants are given guidance and support to help with any of their business needs.

This program became extremely popular during the height of the recession, and we can see why. If jobs are not available, then the next best thing is to create your own job. By encouraging claimants to work in their own business fulltime, this requires them to become more proactive in getting them back on their feet. The Department of Labor deemed the SEA effective, and was especially successful with people who had been laid off from their previous jobs, or who had already had an interest in creating their own business. Below we can see the direct results of the SEA program in Oregon:

A slide from the SEA webinar presented by Martin Burrows, Assistant Director, Business and Employment Services of Oregon Employment Department

Women’s Initiative is an amazing program geared towards low-income women; however we have limited resources and cannot reach out to everyone. Currently the SEA is not implemented in California, but organizations are working towards getting a budget for next year. According to the Department of Labor, states have until June 30 of 2013 to apply for funding for the SEA program. To read more about this, check out the Department of Labor website here. Although work is in progress to make this program accessible to California residents, many do not know that it exists. You can help make this possible by spreading the word about the Self-Employment Assistance program. 

Partner Spotlight: Exploring New Opportunities for Entrepreneurs at La Cocina’s Conference

By Kelly Baker, Regional Evaluation Associate, AmeriCorps VISTA
 
On the tail end of their wildly successful Street Food Festival, La Cocina hosted their 3rd Annual Food & Entrepreneurship Conference. Through Women's Initiative's partnership with La Cocina as members of the San Francisco Economic Development Alliance, I was lucky enough to attend the second day of the conference free of charge.

The day was packed with thematic panel discussions around food, technology, and entrepreneurship. In the morning I attended “How to Create Spaces for Successful Entrepreneurship.” The panelists included representatives from Bay Area farmers’ market associations, Josh Assink with Urban Village and Lulu Meyer with the Ferry Plaza Farmers’ Market, as well as Alec W. Bauer of KRBS, Jonny Price of Kiva, and Junette Sheen of CCEDA acted as moderator. During the discussion, panelists and attendees grappled with the issue of barriers to entry: lack of access to affordable kitchen space, discrepancies in health code enforcement, and funding.

For me, one of the most interesting pieces to come out of the discussion was a new program Kiva is launching, Kiva Zip. Earlier in the discussion representatives from the farmers’ markets emphasized the importance of bringing people closer to their food source, the coming together of producer and consumer. Kiva’s new program similarly aims to bridge the gap between lender and borrower. Lenders make small loans of at least $25 to a new venture, ultimately contributing to a loan made at 0% interest to the borrower (at higher risk). Price cited an example in which the borrowers often in turn became part of the customer base for their lenders, stopping by to see how things were progressing and supporting their investment. This program has great potential to foster local enterprise.

After a delicious Nepalese buffet lunch, there was a large panel discussion on Food & Technology, discussing new apps, websites, and social media strategies that food entrepreneurs can take advantage of. Participants then broke out into smaller discussion groups after the panel. I attended the session on “Using Technology to Foster Entrepreneurship in Communities.” In this session led by Joel A. Lacayo of Mission Asset Fund and Amanda Oborne of FoodHub, participants shared challenges and strategies for using technology. Many of us in the room represented nonprofits working to help entrepreneurs, so social media outreach and the digital divide were central issues in the conversation.

All in all, the conference was inspirational and informative. It was a wonderful opportunity to connect with a variety of people, organizations, and entrepreneurs working toward innovative new solutions to problems of economic development and recovery.

Economic Self Sufficiency vs. Living on the Financial Edge

By Elizabeth Krueger, Summer Fellow (@elizlk)

A recent PBS Need to Know episode paints a vivid portrait of what it means to be “Living on the Financial Edge.” Watch it and see how a working-but-poor family makes difficult trade-offs every day and month, living on $35,000 a year - well above the federal poverty line of less than $20,000 a year for a family of 3. The mother spreads out her medication rather than taking it as prescribed, the older son works all day without lunch, with a paycheck spoken for before it’s even earned. They have no savings and can’t look to the future, needing to devote all their energies to daily juggling.

Women’s Initiative seeks to help low-income women achieve financial self-sufficiency, but what exactly does that mean?

“To be truly economically secure, and leave poverty behind for good, people need enough money to be able to pay for the basics like rent, food, child care, health care, transportation, and taxes, and enough money to develop savings and assets.” Insight Center for Community Economic Development

In considering the situation portrayed on Need to Know, the family income wasn't enough to cover all its food or health care costs, much less the ability to save – and that’s at an income level nearly double that of the federal poverty guidelines. As the Insight Center describes, the federal poverty guidelines don’t reflect a meaningful measure of what it actually costs to live. The calculations don’t consider the costs of rent, child care, transportation or health care. The calculation is based only on the cost of food, which is assumed to be 1/3 of a family’s total cost of living, with no variation by region. Do you think milk, bread and eggs cost the same at a grocery store in San Francisco and Indianapolis? Neither do I.

The Insight Center has an online Self Sufficiency Calculator for California on its website, which paints a better picture of what income would be required for economic self-sufficiency. For San Francisco County, the annual income is around $48,000 for a family of 3 adults – more than $13,000 more than the family in Newark, NJ. And food costs are estimated at less than 1/5 of monthly income, unlike in the federal guidelines. According to the US Census Bureau, which uses the federal poverty guidelines, there were 46.2 million Americans living in poverty in 2010. Imagine how many people live below the much higher standard of true economic self-sufficiency.

For women driven to own their own businesses, Women’s Initiative can help. In addition to teaching women the necessary business skills, Women’s Initiative training covers personal financial literacy skills, similar to some of what was described in the Need to Know program. Women need to know how to avoid the pitfalls of the financial system, generate income and start to build savings to achieve self-sufficiency. 

Productive Economy ≠ Higher Living Standards

Author: Allyson Stewart, Research & Public Policy Fellow, Women’s Initiative


In a recent issue brief, “The wedges between productivity and median compensation growth,” Economic Policy Institute President Lawrence Mishel debunks a common misconception: Increased productivity growth in the American economy does not benefit the average American. Instead, productivity gains have translated into exacerbated income inequality.


“We are often told that greater competitiveness and higher productivity are the keys to higher living standards,” said Mishel. “In fact, productivity growth only establishes the potential for improved standards of living. In the past four decades, and especially recently, it has not translated into proportionate gains for working families.”


The brief highlights a major divergence between productivity growth (growth of the output of goods and services per hour worked) and compensation growth for the average worker that has contributed to rising income inequality over the past thirty years and in particular the last decade. According to the brief, “Productivity in the economy grew by 80.4 percent between 1973 and 2011 but the growth of real hourly compensation of the median worker grew by far less, just 10.7 percent.” The figure below shows the rising gap between productivity and compensation:





The brief attributes this phenomenon to three causes: The rising inequality of compensation, the erosion of labor’s income share (and corresponding increase in capital income’s share), and a more minor cause, the deterioration in “labor’s terms of trade.” Essentially, firms are making more money, but not sharing it equally, or even close to equally, amongst workers. Instead, most of the gains are going to the highest paid employees and shareholders, and at the same time the cost of goods workers purchase are going up faster than their wages increase. Unless productivity gains are distributed more equally, those gains will continue to exacerbate income inequality.


At the Women’s Initiative for Self Employment we create opportunities for working class Americans to create better paying jobs for themselves, build assets, and make greater investments in labor (as opposed to capital) through small business ownership. Just one year after graduating, our clients' average household income leaps from $22,008 to $34,980—an increase of nearly 60%. Graduates also double their rate of home ownership in the two years after training, and their average household net worth grows by more than 300%, from $12,968 to $53,572. In keeping with The Andersonville Study of Retail Economics finding that local businesses spend 28 percent of revenue on labor compared to 23 percent for chains stores, we find that our graduates consistently make significant investments in their workers - Women’s Initiative graduates provide an average of 2.5 jobs through their businesses and pay an average wage of $16.45 per hour—more than double the federal and State minimum wage. These outcomes suggest that increased investment in microenterprise training and support offered by organizations like the Women’s Initiative could help close the gap between productivity growth in the U.S. economy and the well-being of the average worker.