The Business Case and Economic Impact of Inclusion

By Mercedes Sanchez-Moore, OCEcD

The mission of economic developers is to grow jobs and capital investment in our communities. While the distribution of employment and investment in communities around the country has long been a concern of Economic Development Organizations (EDO), the question about “WHO” in the community benefits from any increase in jobs and investment is attracting widespread attention.

Economic research shows that since the year 2000, minority groups such as Hispanics and African Americans, have been affected by declining of household incomes, growing inequality in income distribution, higher levels of unemployment, concentrated poverty, and low rates of mobility among classes (IEDC, 2016). Unfortunately, the downward trend in economic opportunity continued during the economic recovery, and recent data shows that it has further deteriorated amid the COVID-19 pandemic.

The issue of economic opportunity is of great importance to the economic development profession. Growing income inequality in communities hinders the ability to improve the economy (OECD, 2014). The sad reality is that, nationwide, distressed locations are becoming more distressed, while prosperous places are becoming more prosperous. According to an analysis from the Economic Innovation Group (2016), the number of new business establishments and employment creation had grown in prosperous zip codes. In contrast, already distressed neighborhoods are becoming more distressed due to the loss of employment and increased businesses closures.

Inequality depresses economic growth in several ways (IEDC, 2016):

• Inequality produces poverty and the costly social problems associated with it, including among others, crime, substance abuse, health problems, housing instability, low rate of education attainment and lack of job skills. These conditions, in turn, have a negative economic effect and tend to lower labor force participation, while increasing unemployment, workplace and hiring discrimination, and employee turnover.
• People who are not working cannot contribute to the economy, and therefore, there is a loss of economic output and earnings.
• Apart from reducing consumption, inequality also affects the availability of talent in sectors that are critical for the economy.
• Recent protests and riots in major U.S. cities over the past months have called attention to various dimensions of economic inequality and racial discrimination. Civic unrest harms communities in several ways, from costly repairs of property damaged to affecting the perceptions of trust and safety, and the community’s reputation as an attractive place to do business.

Improving economic opportunity for all requires a special focus on the inclusion of minorities and other disadvantaged members of the community. Inclusive economic development strategies could reduce poverty and inequality and the costs associated with them by generating jobs with sustainable living wages, by providing economic opportunities for all segments of society, and by distributing the wealth generated from economic prosperity more equally (SDGF, 2021).

Following are some suggestions to assist in the development of inclusive economic development strategies:

• Champion the business case for diversity and inclusion by educating, leading and influencing businesses on creating diverse and inclusive workforce cultures.
• Prioritize in increasing skills among minorities and low income individuals and productivity in targeted industrial sectors, instead of prioritizing short term objectives at the expense of long term prosperity.
• Invest in economic infrastructure – including transportation and training – to get a larger number of minority and low income individuals into better jobs while developing an adequate social infrastructure – childcare, health, work support and mental health services to empower disadvantaged individuals.
• Support the growth of existing local disadvantaged businesses to create sustainable local jobs so the wealth of the community is shared more evenly.
• Empower residents to work together with civic, business and community leaders from existing community institutions to plan for growth in a manner that supports quality of life for all.

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Economic Development Research Partners, International Economic Development Council, “Opportunity for All: Strategies for Inclusive Economic Development.” 2016

Economic Innovation Group, “Distressed Communities Index: An Analysis of Well-Being Across the United States.” February 2016.

Organization for Economic Cooperation and Development (OECD), “Does Income Inequality Harm Economic Growth?” Dec. 2014.

Sustainable Development Goals Fund (SDGF), “Inclusive Economic Growth for Poverty Eradication”. (2021)