What we have learned about the potential of anchor institutions, such as hospitals and universities, to create opportunities for low-income people.

Anchor institutions such as universities and hospitals generate billions of dollars in economic activity every year. Despite this reality, few regional economic development strategies are built around these stable and rooted institutions, and fewer strategies still seek to harness these institutions’ full economic power – buying, hiring, investing, etc. – to create opportunities for low-income people.

Through our work with several cities participating in The Integration Initiative, we have become convinced that, in order to maximize the impact of anchors’ economic activity to improve the lives of low-income people, anchors cannot act alone but rather must be part of a broader system whose actors align their efforts and investments. Creating these systems will require coordinated effort across a broad network of leaders across sectors. At our March 2012 Design Lab, we convened over 60 such leaders to explore the challenges and opportunities of creating this alignment.

One area of work highlighted at the Design Lab was anchor procurement – more specifically, efforts to target anchors’ purchasing towards local businesses that are more likely to employ low-income, lower-skilled workers. Anchors in a given metropolitan region purchase large quantities of goods and services every year. If even a small portion of that procurement in a given city were concentrated locally – and targeted in such a way as to favor businesses that hire low-income people – substantial numbers of local jobs could be created.

Realizing this potential, however, is not straightforward. A recent study by Kim Burnett commissioned by Living Cities identifies a number of challenges in the work, including: that the full business case for local procurement work is not yet clearly articulated; that it can be hard to find local businesses with the capacity to sell to anchor institutions; and that broader small business development systems in cities have yet to align their efforts in order to address this capacity issue. Even while the field wrestles with these and other challenges and works to assess the priority to place on procurement strategies, the study outlines a number of actions for the field to move the work forward:

  • Document the business case for local procurement: Until a more robust, bottom-line business case can be articulated for this work it will be seen as an “add-on” rather than a “must-do”

  • Clarify the “end-game” of local procurement strategies: Procurement strategies can seek to increase supplier diversity, create jobs for local low-income residents, or advance other goals –clarifying and weighting these outcomes will help the field develop better strategies and metrics

  • Address systemic issues: New approaches are needed to level the playing field between small local businesses and larger firms (for example, finding more affordable ways for small businesses to meet anchors’ bonding requirements), build the capacity of small businesses to service anchors, address the lack of data which makes it harder to match high-capacity businesses to anchors that need their services, and identify and promote needed policy changes, and

  • Build the field’s capacity for peer learning and systems innovation: Organizations like Initiative for a Competitive Inner City and U3 Ventures already play significant field-building roles, but new entities might also be needed to advance the significant body of work outlined above.

More broadly, this work has informed our thinking about how metropolitan regions can align policies, programs and investments to harness regions’ economic assets for the benefit of low-income people. Anchors, for one, go beyond universities and hospitals to include such entities as sports teams, government offices, utilities, and military bases; other economic assets may include industry clusters and natural resources – could approaches like procurement strategies help to create more low- and mid- skill jobs through these types of assets? And how can anchors be integrated into broader small business development strategies like economic gardening to enhance job creation in cities and regions? Without addressing these broader questions, we will remain stuck in an approach that focuses on individual actors to the exclusion of broader systems, and in doing so falls short of its potential to create economic opportunity for low-income people.

Photo Credit: Detroit Woodward
Corridor Initiative