Archive for March, 2009

Churches and Economic Development

by Christine Hamilton-Pennell
Growing Local Economies, Inc.

Most people don’t think of churches and other houses of worship as drivers of economic development. After all, the separation of church and state in the U.S. means that not-for-profit religious institutions do not pay property and other taxes. A community that depends on property taxes to drive government revenues will lose money on the property owned by a church or other house of worship (temple, synagogue, mosque, or shrine).

But looked at from another perspective, churches and other houses of worship contribute to the local economy in a variety of ways. Most churches employ at least one person, and many have upwards of 20 employees, especially if they operate a childcare facility or school. Since they generally operate a facility, churches are consumers of energy to heat and cool the often large, open spaces. They also use insurance, maintenance, landscaping, and construction services (albeit sometimes as volunteer labor), and they consume office supplies, furniture, curriculum materials, and specialty church items.

Participants in religious organizations represent a significant market for religious goods and services. According to the 2009 annual edition of the Yearbook of American & Canadian Churches (edited by the National Council of Churches and published by Abingdon), membership of the top 25 churches in the U.S. totals more than 146.6 million. A 2004 Gallup Poll reports that six in ten Americans consider religion to be a “very important” part of their lives and another 26 percent responded that religion was fairly important. More than eight in ten were affiliated with a Christian religion, and half of the respondents said they were Protestants. The largest single religious denomination was Catholic, accounting for about 25 percent of Americans. Some 2 percent were Mormons and another 2 percent were Jewish.

In 2006, a Packaged Facts report on religious markets predicted that the overall religious market for publishing, inspirational merchandise, and audio/video/software product would grow to $9.5 billion by 2010.

On a more personal level, many entrepreneurs report that the religious community has been an important source of moral support for them as they start and grow their businesses. The connections made in a worship community can lead to financial opportunities as well.

Beyond their role as consumers of goods and services, however, churches and their members can also be a force for economic development in their local communities.

The Black church in the U.S. has been aware of its important role in economic development since the time of slavery. In 1977, Gil B. Lloyd wrote an article, “The Black Church and Economic Development,” in which he demonstrated that, historically, the Black church has played an important role in the social and economic life of the Black community. He argued that the Black church, often in partnership with the federal government, has provided both moral and economic impetus for the economic redevelopment of urban areas.

Fast forward to 1993, when Black Enterprise featured a cover story entitled, “The New Agenda of the Black Church: Economic Development for Black America.” In it, author Lloyd Gite profiles the work done by Black churches in several urban areas, including Detroit’s Hartford Memorial Baptist Church, which invested heavily in local economic development projects, from building shopping centers to senior citizen housing in order to create jobs and businesses.

Rev. Charles Adams, Hartford Memorial’s pastor, offered his perspective. “The church needs to concentrate on the business of creating economic institutions,” declared Adams. “The issue is jobs. People being laid off through all this corporate downsizing is affecting every black community in this country. The church finds itself in a situation where it is the best continuing, organized entity in the black community for the acquisition and redevelopment of land, the building of business enterprises and the employment of people.”

“The black church recognizes it has to be in the forefront of economic development,” says C. Eric Lincoln, author of The Black Church in the African-American Experience. “It has become evident that black people are simply going to have to stand on their own feet and the black church, with all of its economic power, can help facilitate that by creating businesses.”

The same issue of Black Enterprise also includes an article on how to set up an economic development plan for a church.

A 2006 article in The State, “Church Plans Tangible Change to a Community,” was picked up by The Black Informant, http://www.blackinformant.com/, and reiterates this theme. The article states, “In many cities and towns, the net result of diminishing government and private investment, deteriorating infrastructure, business closures and joblessness is the perpetuation of an underclass disenfranchised from mainstream society. While many of these areas are distressed and full of despair, the good news is that African-American churches are bringing the gospel of economic development to these communities and renewing hope for a better way of life. The article profiles the economic development work done by Columbia, South Carolina’s Bible Way Church of Atlas Road.

“Bible Way Church of Atlas Road, through its Midlands Community Development Corp., is helping lead the way. The church recently announced a 106-acre mixed-use project that will include affordable homes, a new worship center, a performing arts building, a recreational facility, a hotel and a commercial and medical complex. These developments could transform the Lower Richland community and have rippling effects across the Midlands.

“When such developments take place in low-income areas, they increase property values, attract new residents and become magnets for diverse businesses and better-paying jobs. Church-based business enterprises help rebuild a community’s social infrastructure and provide such much-needed values-based services as child care, youth development, elder care and substance abuse counseling. These activities tend to lead to improved schools, better public safety and an enhanced quality-of-life. From this type of community economic development, everyone—those living in the area and those in surrounding communities—benefits.”

Of interest is an upcoming book by Marci Bounds Littlefield, Assistant Professor of Sociology at IUPUI, who works in the areas of race and ethnicity, urban development, and family in relation to religious institutions. She writes on the black church and economic development in the United States and is presently at work on a book titled Religious Institutions and New Ventures: Evidence from the African American Experience, http://www.iupui.edu/~raac/fellows.html.

Finally, a recent research study by Jonathan Gruber of the MIT Department of Economics looks at the implications of religiosity for economic outcomes. He determines that a major determinant of religious participation is religious market density, or the share of the population in an area which is of an individual’s religion. His findings are that a higher market density leads to a significantly increased level of religious participation, and as well to better outcomes according to several key economic indicators: higher levels of education and income, lower levels of welfare receipt and disability, higher levels of marriage, and lower levels of divorce.

Churches and other houses of worship are part of the network of assets in a local community. Regardless of the fact that their fortunes are tied to the rise and fall of the economy, they are a significant force for economic development in at least three areas—as investors, consumers, and support groups for entrepreneurs.

Sources:

“Church Plans Tangible Change to a Community, November 24, 2006, The State, reported in The Black Informant, http://www.blackinformant.com/uncategorized/church-plans-tangible-change-to-a-community.

“Consumer View: Religious Market: Provided Retail Remains Healthy, the Religious Market Will Continue to Grow.” License Global!, September 1, 2006, http://www.licensemag.com/licensemag.

Gite, Lloyd. “The New Agenda of the Black Church: Economic Development for Black America,” Black Enterprise, Dec, 1993. http://findarticles.com/p/articles/mi_m1365/is_n5_v24/ai_14680366.

Gruber, Jonathan. Religious Market Structure, Religious Participation, and Outcomes: Is Religion Good for You? National Bureau of Economic Research Working Paper Series, No. 11377, May 2005. http://www.nber.org/papers/w11377

Lindner, Eileen W., National Council of the Churches of Christ in the United States of America, eds. Yearbook of American & Canadian Churches. Nashville: Abingdon. 2009.

Lloyd, Gil B. The Black Church and Economic Development,” Western Journal of Black Studies, v1 n4 p270-75 Dec 1977.

“Religious Organizations.” Encyclopedia of American Industries. Gale, 2008. Reproduced in Business and Company Resource Center. Farmington Hills, Mich: Gale Group. 2009.

(c)2009 Christine Hamilton-Pennell, Growing Local Economies, Inc.

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Economic Impact of Entrepreneurship

I am often asked for sources of data about the economic impact of entrepreneurship. This is a difficult question, at least in part because there is little agreement about what the term “entrepreneurship” actually means. The definition of entrepreneur that makes the most sense to me is “someone who perceives an opportunity and creates and grows an enterprise to pursue it.” This includes social entrepreneurs as well as those who create a for-profit entity.

Here’s a summary of what some of the research says about the economic impact of entrepreneurship:

• A California study of interstate business relocation (either into or out of the state) showed that over the ten-year period from 1993 to 2002 relocation had a negligible impact on job growth. Rather, employment changes in California were primarily driven by the processes of establishment expansion, contraction, birth, and death, rather than by relocation. (Neumark, Zhang and Kolko, 2006).

• A review of 57 recent research studies on the economic value of entrepreneurship, (van Praag and Versloot 2007) concludes that entrepreneurship has an important function in the economy. The authors define entrepreneurial firms as those that employ fewer than 100 employees, have existed for less than seven years, and are new entrants into the market. These firms engender substantial job creation as well as productivity growth and the development and commercialization of innovation. More importantly, however, “entrepreneurial firms produce important spillovers that affect regional employment growth rates of all companies in the region in the long run.”

• David Birch’s review of available data (1981) revealed that between 1969 and 1976, two-thirds of net new jobs were created by firms with 20 or fewer employees. Later studies (Birch and Medoff, 1994; Birch, Medoff and Haggerty, 1995), concluded that just 4 percent of ongoing firms—high growth firm, the so-called gazelles—account for 70 to 100 percent of all new jobs in the United States.

• In a recent survey of almost 20 research studies Henrekson (2008) validates the importance of gazelles in creating jobs. He finds that gazelles—which are not necessarily small or young firms—create all or a large share of net new jobs. Acs, Parsons, and Tracy (2008) add to this body of knowledge in their study of “high-impact firms,” which they describe as “enterprises whose sales have at least doubled over a four-year period and which have an employment growth quantifier of two or more over the period.” On average, high-impact firms are 25 years old, they represent between two and three percent of all firms, and they account for almost all of the private sector employment and revenue growth in the economy. They are found in all industries and almost all regions. Most have fewer than 20 employees.

• Economic Gardening, “an innovative entrepreneur-centered economic growth strategy that offers balance to the traditional economic development practice of business recruitment” (Quello, 2006), was first pioneered in Littleton, Colorado in 1989. Littleton’s economic gardening project has operated for two decades and has demonstrated some impressive outcomes. During the period between 1990 and 2006, Littleton’s employment growth more than doubled, from 14,907 to 30,151 jobs, while its population grew by a little over 24 percent. In comparison, the Denver metro region produced an increase of 45 percent in new job growth, and its population grew by about the same percent. Sales tax revenues in Littleton tripled during the same period of time, from $6.8 million in 1990 to $19.6 million in 2006 (Hamilton-Pennell, 2007). Several new retail and business developments came online during that 20-year period, so there are likely many reasons for the job growth. One important fact, however, is that Littleton did not spend any public funds on recruiting or providing incentives to businesses to come into the city.

References
Acs, Z. J., Parsons, W., & Tracy, S. (2008). High-impact firms: gazelles revisited. Washington, D.C.: Small Business Administration.

Birch, D. L. (1981). Who Creates Jobs? The Public Interest, 65(Fall), 3-14.

Birch, D. L., Haggerty, A., Parsons, W., & Cognetics, I. (1995). Who’s creating jobs? [Cambridge, Mass.]: Cognetics, Inc.

Birch, D. L., & Medoff, J. (1994). Gazelles. In Lewis C. Solmon and Alec R. Levenson, eds. Labor markets, employment policy and job creation (pp. 159-168). Boulder, Colo.: Westview Press.

Hamilton-Pennell, C. (2007, July). The City of Littleton’s economic gardening program: an entrepreneurial approach to economic development

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. Helena, Montana, Pacific Northwest Economic Development Council.

Henrekson, M., & Johansson, D. (2009). Gazelles as job creators: a survey and interpretation of the evidence. Stockholm: Research Institute of Industrial Economics, http://www.ifn.se/web/733_1.aspx.

Neumark, D., Zhang, J., and Kolko, J. D. (2006). Interstate business relocation: an industry-level analysis. San Francisco, Calif.: Public Policy Institute of California, http://www.ppic.org/main/publication.asp?i=710.

van Praag, C. M., & Versloot, P. H. (2007). What is the value of entrepreneurship? A review of recent research. Bonn, Germany: Institute for the Study of Labor, http://ftp.iza.org/dp3014.pdf.

Quello, S., & Toft, G. (n.d.). Economic gardening: next generation application for a balanced portfolio approach to economic growth. In The Small business economy for data year 2005: a report to the president (pp. 157-193). Washington, D.C.: Small Business Administration, http://www.sba.gov/advo/research/sbe.html.

(c) 2009 Christine Hamilton-Pennell

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