Written By Emily Warren, postdoctoral fellow, 21st Century Cities Initiative, Johns Hopkins University and first published on the 21CC Blog
At our 21st Century Neighborhoods symposium, held in Baltimore in December, Mayor Ras Baraka of Newark, New Jersey, outlined Newark 2020, a strategy for addressing growing economic inequality by connecting low-income Newark residents with local companies to hire 2,020 residents by 2020. The initiative relies on increased local hiring by Newark’s anchor institutions, such as Rutgers University-Newark, RWJBarnabas Health, and Prudential. This post describes anchor institutions, their potential roles in reducing economic and neighborhood inequality, and examples of partnerships between anchor institutions and local government.
Historically referring primarily to universities and health care systems, the definition of anchor institutions has expanded in recent years to encompass a variety of local for-profit and nonprofit organizations that have a significant geographic and/or market presence, especially in lower-income communities. Along with traditional “eds and meds,” anchors include financial institutions, arts and culture organizations, religious organizations, and utility companies. Anchor institutions are not necessarily only present in large cities, as small or mid-sized cities typically contain large employers that “anchor” the community’s economic landscape by providing a significant proportion of local employment and purchasing power.
While anchor institutions make important contributions to the local economy, they often have a complicated history with their host communities. The workforces of anchor institutions have not always reflected local community demographics, which means that local residents are often not able to fully benefit from their close proximity to anchor institutions. Jobs at anchor institutions tend to be relatively secure, well-paid, and offer health and retirement benefits, all of which are especially important to economically disadvantaged groups. And while anchor institutions spend significant amounts of money each year on good and services, a majority of those are often purchased from non-local vendors. Local procurement supports locally-owned businesses, which are more likely to be owned by and employ minorities and women. Procurement from vendors outside the area, in combination with a lack of local hiring, hinders the ability of anchor institutions’ economic power to have significant local impacts and to address local inequality.
Recent research on Newark’s anchor institutions highlighted these issues around local hiring and procurement. The New Jersey Institute for Social Justice found that in 2015 an estimated 18 percent of working-age Newark residents held jobs within the city. Studying six anchor institutions, which included both higher education and financial institutions, the Initiative for A Competitive Inner City (ICIC) found that in 2013, only 3 percent of the goods and services purchased by these institutions were purchased from Newark businesses. These trends have been a motivating force behind the creation of Newark 2020.
There are several strategies that cities and anchor institutions can pursue to help anchor institutions become more effective economic partners.
To learn more about how anchor institutions can expand economic opportunity and inclusion in their communities, read our policy brief: Private Sector Efforts to Support Economic Inclusion
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