Brooklyn's Progress
June 2004

On June 2, Randolph Peers, the Brooklyn Chamber’s Vice President for Economic Development, was among a small group invited to testify at a hearing before the Congressional Committee on Small Business in Washington, D.C.  U.S. Representative Nydia Velázquez is a member of the Committee.  The hearing focused on the importance of worker training and retraining to maintain the nation’s leadership in science and technology.  The hearing also looked at the role of education in keeping small manufacturers competitive in a global economy.  Following is Mr. Peers’ testimony:

Good afternoon, my name is Randolph Peers and I am the Vice President for Economic Development at the Brooklyn Chamber of Commerce.  I want to thank Chairman Manzullo, Representative Nydia Velazquez, and all of the committee members for inviting me to participate in this hearing.  I’d like to start by giving some background information on the borough of Brooklyn and the Brooklyn Chamber of Commerce.

Brooklyn is the most populous of New York City’s five boroughs with a population of approximately 2.5 million people and over 36,000 businesses.  A majority of these businesses, some 67%, employ between one and four workers, making Brooklyn home to a true small business economy.   

Founded in 1918, the Brooklyn Chamber of Commerce is a business assistance organization dedicated to helping Brooklyn businesses grow and prosper, while seeking to foster overall economic development throughout New York City.   With more than 1,200 Members from all parts of the borough, the Brooklyn Chamber is the largest Chamber of Commerce in New York City, and one of the fastest-growing business associations in the region. 

In my testimony today, I would like to share with you the small business perspective as it relates to issues of education, training, and workforce development, based on the Brooklyn Chamber’s seven years of direct involvement in providing workforce services to its membership.  On a personal level, having spent the last thirteen years as a professional in the fields of adult education and workforce development, and now working on the economic development side of the equation, I have experienced first hand the challenges to integrating these two disciplines, especially as they relate to small business.

In May of 2004, the Brooklyn Chamber of Commerce released the results of a comprehensive labor market review  it conducted with support from the U.S. Chamber of Commerce’s Center for Workforce Preparation.  I’d like to briefly share with you some of the study’s findings. 

With respect to business and industry conditions in Brooklyn:

• Brooklyn contributes approximately 407,000 jobs to New York City’s economy.  Of the 407,000 jobs, the majority are concentrated in three industries: healthcare, social services and retail. 
• Our fourth largest sector, manufacturing currently contributes approximately 36,000 jobs to the economy.  Unfortunately, however, it has been the manufacturing sector that has lost the most jobs over the last decade as Brooklyn’s economy shifts from goods producing to service-oriented.
• While the study identified industries currently experiencing growth in Brooklyn, including healthcare, social services, and retail, several other emerging sectors were uncovered, including construction, the FIRE sectors (Finance, Insurance and Banking), and tourism-related sectors. 
• 42% of Brooklyn-businesses indicated a willingness to hire additional workers this year, up from 20% that actually did increase their workforce in 2003.  Companies planning to hire this year cited an improved economy and a general improvement in local business conditions as the reasons for increased staffing.

With respect to recruitment and training issues:

• Of those businesses that did hire additional workers in 2003, 32% indicated that they had a significant problem recruiting “skilled or professional employees.”
• Of those organizations planning to hire, small businesses  struggle the most with recruiting skilled professional labor and supervisory employees (39% and 20% respectively).
• While 82% of businesses overall indicated that they provide some sort of worker training, the majority, 66%, identify the training as informal on-the-job training.  The number of small businesses indicating that they provide informal on-the-job training was 82%.
• Brooklyn businesses were evenly split over the importance of a college degree, with 49% indicating that a degree was “important” or “very important”.  Small businesses seemed to value a degree least; with only 38% indicating a degree was important.
• Finally, only a small minority of businesses of all classifications turned to the publicly funded workforce development system for either recruitment or training assistance, but predictably, small businesses were least likely to utilize the system.

The statistics contained in the Brooklyn Labor Market Review give us a snapshot of a predominantly small-business economy that is in transition.  On the positive side, many emerging industries in the borough are poised for growth, including sectors like the FIRE sectors, construction, and tourism.  These new jobs will require higher skill levels while offering more career ladder opportunities.  By contrast, however, many of the existing businesses are experiencing several obstacles to recruitment and training, especially amongst the more skilled professions.  Additionally, a majority of these companies are small and mid-sized companies representing a myriad of obstacles that prevent them from taking advantage of the public workforce system and its resources.

In many cases, an absence of a formal human resources department or a basic lack of staff capacity devoted to workforce issues represents the most significant challenge.  Small businesses tend to focus more on immediate bottom line issues, not recognizing the impact staffing, training or employee retention issues can have over the long haul.  In other cases, it is simply a lack of awareness that prevents businesses from taking advantage of the public workforce development resources.  In this sense, the public workforce system itself has a marketing challenge, and needs to be creative in reaching out to smaller employers.  Lastly, many small businesses have ambivalence toward working with what they perceive as a “government-run” program that appears too bureaucratic or too social services oriented. 

Since 1998, the Brooklyn Chamber of Commerce has operated a successful staffing service for small businesses.  This program, called Good Help, has been at the forefront of providing various workforce development services to small business by acting as an intermediary between such companies and the public workforce system.  Good Help staff assists companies seeking employees with creating job descriptions and postings.  This information is then disseminated among a network of education and training providers in the community at large.  These providers send appropriate candidates back to Good Help for an initial screening based on the employer’s requirements, with the employer ultimately seeing only those candidates Good Help deemed acceptable.  Through this demand-driven model that views the employer as the primary customer, a small business gains access to the widest possible labor pool in an effort to find the most qualified employee. 

For a small business the advantages in such a service can be many.  For businesses that lack a human resources capacity, the Chamber can provide the expertise to fill the void.  In addition, because these businesses are already working with the Chamber of Commerce in other ways, the comfort of an established relationship increases the likelihood that the smaller employer will see the benefit in such a program.   Over time, these companies would be more receptive to other types of workforce assistance provided by the public system.  These services include such things as incumbent worker training, access to tax credits and wage subsidies, usage of the local One-Stop for additional recruitment assistance, and various forms of technical assistance related to labor compliance issues. 

What I am proposing here is not the creation of an alternative to an existing local workforce delivery system.  Rather, I see the role of business intermediaries like Chambers of Commerce, trade associations, and other local development corporations as being effective marketing agents for the various programs and resources provided through public system.  In other words, I see intermediaries as playing a vital brokering role as a partner in the system.

In fact, the Brooklyn Chamber of Commerce, through an existing grant provided by the U.S. Chamber of Commerce’s Center for Workforce Preparation under their Workforce Innovation Networks initiative, has expanded its intermediary role by providing additional services to the public workforce system.  These services include providing regular research on Brooklyn labor market trends and the direct marketing of under-utilized tax credits provided through our State Department of Labor.  Because of our successful efforts with the Good Help program and the WINs initiative, it was recently announced that we will be awarded a contract to provide a full range of business services through our local One-Stop.  As a full partner in the system, we intend to significantly expand our capacity to bring more small businesses to the workforce table, increasing their access to the many benefits the system can provide.

But while it should be clear that business intermediaries can play an effective role in any workforce system, we must also acknowledge the need to create better synergy between economic development and workforce development.  It is my belief that without greater integration, the success of any workforce development initiative, including training initiatives, will be limited.  It is also my belief that effective workforce development can only serve to compliment effective economic development.  If communities do not implement the conditions to create new jobs through new business development and expansion, there is really no need for workforce development.  It is only through greater coordination and communication between these two worlds, that communities can create new jobs in emerging industries and simultaneously tap into a local workforce that is prepared to fill these jobs. 

To a certain degree, through industry-specific training initiatives, many cities are beginning to create this coordination.  But we must be mindful that such large-scale training initiatives tend to benefit larger businesses that bring many jobs to the table.  It is also important to recognize that small businesses, even in similar industries, have differing needs as opposed to larger companies when it comes to worker training.  Whereas larger companies may be looking for higher tech training as a means to increase worker proficiency in a particular field or on a particular piece of machinery, small companies tend to have more elementary training needs.  Adult basic education, English language skills, critical thinking abilities and soft skills proficiency are more likely to be cited as a small business training need.  This is because small businesses are more likely to hire lesser skilled employees because they cannot compete with larger companies in terms of wages and benefits.  On the positive side, these businesses are more likely to take a chance on hiring from hard to serve and disadvantaged populations.  This however, makes access to incumbent worker training geared toward basic skills critical for the long-term success of both the employer and employee.

Smaller businesses, even in well-established industries, also need a more generic basket of services that includes basic business assistance not directly related to workforce development.  Such services include help with financing issues, basic business planning, access to information on non-workforce related incentive programs, marketing and promotion assistance, access to procurement opportunities, guidance on technology issues and basic technical assistance related to compliance matters.  It is through this type of basic business development support that smaller companies become mid-sized companies and ultimately employ more workers.  In these cases, the road to increased WIA outcomes is long and winding. 

The Brooklyn Chamber of Commerce, through a partnership with the New York City Department of Small Business Services, last year launched an initiative designed to meet the basic support needs of smaller employers and entrepreneurs.  The initiative, named the Business Solutions Center, has already provided assistance to 473 companies since the program began in August of last year.  Of all of the services provided by the Business Solutions Center to date, the most significant has been the $1,800,000 in pending loan applications they have helped to facilitate.  These loans are being provided for business expansion purposes, and in each case where such an expansion includes adding additional workers, the Chamber’s workforce department stands ready to lend assistance.

On a system-wide level, more cities and states are examining ways to create better synergy between workforce and economic development.  In New York City for example, last year the Department of Employment was merged into the Department of Small Business Services.  This merger paved the way for such innovative initiatives as the Business Solutions Center.  In Idaho, Governor Dirk Kempthorne recently announced his state’s intention to merge its Labor Department with the Department of Commerce.  In a press release issued March 26th, Kempthorne stated, “The merger will formalize a long-standing partnership between the two agencies and link the state’s economic, community and workforce development services.”  Many community colleges are also becoming increasingly involved in linking workforce development with successful business incubator projects that are administered through the college itself.  Florida has an excellent consortium of technology-based incubators administered through their university system. 

In conclusion, government should play a powerful role in helping to foster the greater integration between economic and workforce development beyond what is promoted through existing WIA legislation.  Such integration will, in the long run, help not only large businesses, but will empower smaller businesses to grow and become more competitive.  In the process, more small business will take advantage of workforce development and training services.  Increased awareness and participation by small businesses in the workforce system will help to make the system itself more responsive to “business needs” and more in step with industry trends.  Some suggestions for promoting a business-driven system that is more responsive to small business needs include:

• Encourage policies that foster greater collaboration between business, education, workforce training providers, and the public workforce development system.
• Encourage policies that integrate workforce and economic development.
• Create ways to promote and encourage the inclusion of intermediaries like Chambers of Commerce and trade associations in the marketing and delivery workforce services as partners in the system.
• Through WIA, mandate specific business services outcomes, not just job seeker outcomes, in an effort to make the system more accountable to all businesses in a community.
• Expand opportunities and lift restrictions on incumbent worker training programs to allow for wider range of training options.
• Allow WIA funds to be used for limited economic development activities; create new tax incentives and wage subsidy incentives that promote new job creation as well as job retention during economic recessions.
• Support efforts to increase local labor market information designed to predict local industry and business trends.
  

1  The Brooklyn Labor Market Review can be downloaded in PDF format by clicking here.

2  For the purposes of the study, we classified a small business as having between 2 and 50 employees.