Why the next generation of leaders should care about inner cities

This post is reprinted from ICIC's blog. Original story can be found here.

Written by David Brown, Executive Director, TUGG

We are facing a precarious time in the outlook for many of our major cities.  Entrepreneurship is at an all time high, yet social mobility is at an all time low.  If our incoming generation of leaders does not embrace, understand, and put effort in to impacting this relationship, the trajectory of the innovation economy very well may stumble moving forward.

Below are four key points that show just how important mobility is for our long-term growth as a community as well as three things leaders should consider when working with inner cities.  While TUGG is specifically focused on the impacts of opportunity in the Greater Boston area and in tech innovation (and thus some of our references may be local), the great work out of ICIC has shown that issues here are mirrored across the nation.  The need for the next generation to give back to inner cities is pivotal in all verticals.

Why mobility matters

1. Income Inequality is Significant in the US and Growing

In 2010 the CIA released the below graph based on the Gini coefficient comparing levels of income equality across the world.  The US ranked as the 93rd worst country (out of 133 shown) for income equality.

Just how extreme is this fiscal distribution? As of 2010, the top 5% held 72% of the net worth in the US.  At the same time the bottom 90% is accumulating a disproportionate amount of debt, which bodes poorly for the future.

2. High income inequality = low social mobility

This increasing US income inequality matters because it is directly tied to social mobility.  A 2013 Brookings Report succinctly showed the high correlation between income inequality and social mobility in countries. Although towards the middle, the US’s increasing income inequality is tied with decreased opportunities for social mobility versus other competitive countries.

This is worrisome for our future leaders because it means our statistically highest potential individuals are having reduced opportunity to create impact (early IQ tests show relatively balanced distribution of talents across high and low income areas early in life so nurture does play a significant role in outcomes).  As an innovation economy this means that we will underperform our optimal, as the best are not getting a shot at contributing to their full potential.  The same Brookings report shows that this is playing out on a daily basis as access to quality education and experiences are increasingly being dictated by an individual’s financial resources.  The result is that the achievement gap between those with and without resources is increasing and our most selective colleges are continuing to be dominated by children from high-income families.

3. These gaps are becoming particularly visible in our cities

The Boston Foundation recently produced a pivotal report that showed that in Massachusetts, Suffolk County, which primarily is comprised of the City of Boston, has a significantly higher incidence of poverty versus the rest of Massachusetts, with a rate of 20.6% in Suffolk versus 10.5% statewide.  Boston proper also has plenty of high net worth individuals, so it should be clear that the Gini coefficient locally is quite high.

Currently 25 million people in the US live in inner cities (8% of US pop) and as ICIC noted, “While inner cities occupy only 0.1% of US land area, their residents are disproportionately impoverished: Inner cities host 19% of U.S. total poverty and a distressingly high 31% of minority poverty.”

4. Startups may be partly to blame for these issues

A Tech Crunch article echoed the similar economic disparities in San Francisco as ICIC suggests.  However, they furthered the discussion suggesting that a big part of this disparity can actually be attributed to the success of the startup community.  Successful businesses drive up the cost of living and if not paired with proper government housing programs, often gentrify inner city and low-income areas.  This gentrification can lead to a host of negative consequences including enhancing the academic gap suggested previously.

However, as the Tech Crunch article also suggests, we can and should be leaders in helping resolve these hyper-local issues.

How to make a difference now

1. Get involved with great nonprofits today

To be clear, we support nonprofit partnerships with inner city organizations not because nonprofits are a long-term fix for these issues but because they can provide an essential leverage point to enhancing economic resiliency within our low-income inner cities.  TUGG focuses on entrepreneurship, education, and life experiences for youth that prepare these individuals to be the next leaders of high growth businesses (more on our organizations can be found here). 

Once the resiliency is built, inner city communities can be incredibly effective economically. The Inner city 100, or 100 of the fastest-growing inner city companies, created 76,000  jobs over the last 13 years, growing at 49% CAGR.  Impressively, across this group 37% of this workforce came from the local inner city, ½ of which are minorities.  Nonprofits can build the resiliency and workforce , but business is necessary to provide the economic leverage to provide jobs and economic growth opportunities.

Great organizations and opportunities abound across the nation and Guidestar is a great way to find local organizations that align with you and your company’s passions. 

2. Address these areas as a community, not just as an individual

Don’t go it alone.  At TUGG we purposely move the startup community towards projects collectively so that we amplify our impact and bring all relevant resources to bear at the same time.  Going in to projects as a community not only improves outcomes but also helps make the process fun, which makes it easier to keep working with these great programs.  Find others you can work with - inside or outside your company – and you will be able to really stick with it.

3. Recognize the strengths of the inner city and work with key stakeholders

Just as it’s important not to go alone, don’t miss the opportunity to pair up with great groups that can be helpers along the way.  Aside from connecting with startups and small businesses, it’s valuable to build connections with anchor organizations in the inner city.  These organizations, often made up of “eds and meds” provide roughly 11% of inner city jobs and can be great resources – if not under tapped resources – for augmenting impact.  This ICIC report gives great background on anchors you can connect with and their roles in adding value to these communities. 

David Brown (@dbskier) is the Executive Director of Technology Underwriting Greater Good (www.tugg.org, @TUGGorg), a group that brings together New England’s startup leaders to collaboratively support the best new nonprofits fostering entrepreneurship, education, and life experiences for under resourced youth.  TUGG has provided nearly $1M in capital to youth programming and believes that the startup community can be a major catalyst in improving social mobility. Want to learn more about how you can get involved in the community?  Click here.