The American middle class is under stress, but American innovation is alive and thriving. Lots of people and organizations are trying new ways to strengthen the nation’s beleaguered middle class. No single group or government entity, of course, has all—or even any—of the best answers. But together, they might. The most successful approaches often have deep local roots, and many emphasize collaboration.
In an online series throughout the year, National Journal and The Atlantic will highlight innovators for a stronger middle class, ranging from tech start-ups with a vision to organizations with solid track records for improving social outcomes or helping businesses grow. The patchwork of ideas across the nation and across sectors of the economy offers clues—and reasons for hope—for middle-class prosperity in the Next Economy.
Here are five proven innovations.
FROM PROM TO WORK
Frank Pena doesn’t have much time to chat, because he’s repairing a jet engine. The 24-year-old technician at Lockheed Martin is a big guy, but even he looks tiny compared with some of the engines—from the Air Force’s C-5 to the commercial Boeing 727—arrayed in the San Antonio factory. Pena is here, and not flipping burgers at McDonald’s, because of a decision he made when he was a sophomore in high school. He enrolled in the Alamo Area Aerospace Academy.
“They wish they’d done the same thing I did,” Pena says of his high school friends who are working in low-wage service jobs. San Antonio’s four industry-driven Alamo academies are rigorous programs that leave little time for band or football. But graduates finish high school having earned half the credits they’ll need for an associate’s degree, while gaining solid work experience, and—if they’re lucky—a job offer from a major corporation.
The Aerospace Academy grew out of Lockheed Martin’s worry that too many of its workers were reaching retirement age. San Antonio has long been a center of heavy-aircraft maintenance, because of the Air Force bases nearby. But the area had no pipeline to encourage and train young people to enter the field.
Several years ago, this unmet need prompted Joe Wilson, then Lockheed Martin’s manager of staffing and development, to approach a community college to discuss possible solutions. The aerospace sector, local school districts, San Antonio officials, and the two-year Alamo Colleges developed a program they hoped would encourage teenagers to consider a career in the aerospace industry and accelerate their path to becoming certified mechanics.
Students accepted into the competitive Aerospace Academy spend their junior and senior years of high school taking courses—at no charge—that count toward both a high school diploma and a community-college degree. They also complete a paid summer internship hosted by a participating employer. The academy has been so successful, Wilson says, it now produces a fifth of the workers Lockheed Martin hires locally right out of high school.
The program inspired other industries to follow the same model. San Antonio is home to three additional Alamo academies, training students to work in manufacturing, health care, and information technology.
The promise of free college credits is what attracted 17-year-old Jacob Trevino to the Aerospace Academy. “It just blew my mind,” he said, to learn how many credits he could earn while still in high school. Trevino likes mechanics, but he’s more interested in business. No problem: It’s not unusual for academy graduates to move eventually from the factory floor to the business office, earning bachelor’s and master’s degrees along the way.
A PROPHET’S RENT SUBSIDIES
Breaking the cycle of poverty starts with helping the mothers. That’s the philosophy behind the Jeremiah Program, a nonprofit group in Minnesota that provides young, single mothers with an apartment and child care while they work toward a college diploma.
Single-parent families headed by a mother are four times as likely to live in poverty as families with married parents and children under 18, according to federal census data, and Americans raised in poverty are likelier to struggle as single parents themselves. Bearing a child too young can prevent poor women from getting the education they need to land better jobs.
The Jeremiah Program hopes to block that cycle, offering 39 apartments in its Minneapolis “campus” at subsidized rents and 38 others in St. Paul, each with a child-care facility on-site. The organization also offers coaching in life skills, help in getting a job, and a sense of community.
Many of the woman who apply to the program are “from families that have been in poverty for many generations, and there is something in them that is wanting out of that,” says Kathy Graves, a Jeremiah spokeswoman. They must already be enrolled in a higher-education program and undergo 16 weeks of “personal empowerment training” before moving into an apartment. The women’s average age is 24, and most of their children are 5 years old or younger; they typically work part time to pay their rent (set at a third of their income) and the costs of education.
Evidence suggests the program works. Of the mothers who graduated in 2011, a majority had been unemployed and the rest earned an average of $9.50 an hour. After graduating from college—and the Jeremiah Program—the women saw their value as workers more than double, to an average of nearly $20 an hour.
The program, founded in 1998, has remained small in scale. It isn’t cheap—expenses exceeded $3 million in 2011, mostly financed by donations, grants, and fundraising events. But it offers value. An independent study conducted by Wilder Research of St. Paul found that every dollar invested in the program’s families can return as much as $7 to society at large, by reducing dependence on public assistance and improving the job prospects for mothers and children alike.
The group named itself after the Old Testament prophet, inspired by the passage (Jeremiah 29:7) that begins, “Seek the well-being of the city where I have sent you into exile.” The program will roam farther later this year when it expands to Austin, Texas. Another site is being planned for North Dakota, near Fargo.
LATINO LINES OF CREDIT
Paula Carde’s family business in a suburb of Raleigh, N.C., almost didn’t get off the ground in 2011. No traditional bank was willing to extend a line of credit to the fledgling construction company. “I went to SunTrust, I went to BB&T, I went to Four Oaks,” Carde recalls, “and because our business was so new, they weren’t willing to give us enough.” The only financial institution in North Carolina willing to take a chance on Carde, her brother, and her father—all immigrants from Chile—was the Latino Community Credit Union.
LCCU, based in Durham and with 10 branches across the state, serves a population that most other financial institutions overlook. Many of its members live paycheck to paycheck, have never deposited money in a bank, and aren’t fluent in English. Yet LCCU is one of the nation’s fastest-growing and most financially stable credit unions, with a low delinquency rate compared with its peers.
The credit union was founded in response to a late-1990s crime wave in Durham. Muggers targeted Latinos because they were more likely to be carrying cash. It’s a common problem across the country. About a fifth of Latino households in the U.S.—and more than a third in which only Spanish is spoken—don’t have a deposit account, according to the Federal Deposit Insurance Corp.
Two North Carolina credit unions and a nonprofit group created the independent entity that now holds more than $112 million in assets and serves more than 54,000 members in English and Spanish. In its first eight years of operation, as LCCU opened new branches, robberies declined in the host counties by an average of 4.2 percent, according to a University of Virginia study.
Some longtime members of the credit union have risen from poverty into the middle class, says Erika Bell, the organization’s vice president of strategy and services. Depositing money eases other financial transactions and allows members to create a credit history. “They now own a home, they have gotten into the habit of budgeting and saving,” she says, “and have kind of been integrated into the mainstream financial system.”
As health care providers look for cheaper ways to reach more patients, there’s no better prospect than connecting online. Now, residents of Michigan, Minnesota, and Wisconsin have an all-online clinic as an option: virtuwell, run by the Minnesota-based company HealthPartners.
Offering quality care to more patients at a lower cost is considered the “triple aim” of health care, and virtuwell achieves all three goals, says Patrick Courneya, medical director of the HealthPartners health plan. The company’s researchers recently examined insurance claims from users of the online clinic and concluded that virtuwell spends an average of $88 less per episode than if the care is provided face-to-face—and with no decline in clinical effectiveness. The findings were published in February in the peer-reviewed journal Health Affairs.
Across the medical system, providers are experimenting with transferring care to lower-cost settings, such as clinics, or to nurse practitioners and other less expensive professionals. Automating the diagnosis of ailments such as urinary-tract infections and flu can cut costs without risking patients’ health.
Here’s how it works: On the Web, you head to virtuwell.com and respond to a series of questions about your symptoms and medical history. If the responses suggest a condition that might need urgent care or an in-person examination, virtuwell tells you it might not be the right option for you. Otherwise, for a charge of $40, you receive—within 30 minutes—a diagnosis and treatment plan reviewed and authorized by a nurse practitioner or a physician’s assistant. Nurses are available to talk by phone if you have any questions. The service also sends prescriptions directly to your preferred pharmacy.
More than 40,000 users have received treatment plans from virtuwell since the service debuted in 2010; about 56,000 were told to seek face-to-face care. Nearly all of virtuwell’s patients would have gone to a medical office instead, rather than do nothing, the company’s research found. Health insurance plans often cover part of the patients’ cost.
COACHING SMALL BUSINESS
The national economy can’t rely entirely on major corporations and entrepreneurs for innovations aimed at reviving the U.S. manufacturing base. Older, small, and midsize companies must be forward-thinking, too—and many of them would benefit from a little expert advice.
This realization inspired the Manufacturing Advocacy and Growth Network, or MAGNET, in northeastern Ohio to launch an initiative to connect smaller manufacturers with a range of resources that can help them grow. A nonprofit consulting organization founded in 1984, MAGNET has focused on helping local manufacturers increase their competitiveness. But its Partnership for Regional Innovation Services to Manufacturers, or PRISM, established 18 months ago, also connects companies with other manufacturers, local universities, and NASA’s research center in Cleveland, embedding them in a network that offers more expertise than MAGNET alone can provide.
“By the end of 2017, we think the companies that we’ve worked with will have created some 3,500 new jobs,” said Dan Berry, MAGNET’s president and CEO. PRISM is already helping 16 companies, which hope to create 470 jobs by the end of next year.
From 1990 until 2012, northeastern Ohio—in the heart of the Rust Belt—suffered a 41 percent decline in manufacturing jobs, according to Team Northeast Ohio, an economic-development group based in Cleveland. Small and midsize firms have been particularly hard hit, not only by the Great Recession but also by the long-term decline in manufacturing nationwide. Yet 14 percent of northeast Ohioans still work directly in manufacturing, and the sector drives 45 percent of the region’s total employment, according to a 2011 report from the Brookings-Rockefeller Project on State and Metropolitan Innovation.
PRISM intends to help businesses that come up with an idea that might generate a double-digit growth in revenue. Its services should prove particularly useful for contract manufacturers that make only a couple of products for a couple of clients, said Greg Krizman, MAGNET’s senior director of marketing. PRISM’s current clients range from an advanced battery manufacturer to a 50-year-old company that makes bed frames.
Strengthening small and midsize manufacturers can also help the big players, Berry argues, by improving the supply chain and elevating workers’ skills. Over the long term, a focus on innovation might attract other manufacturers to relocate to the region.
In the short term, however, MAGNET must figure out how to cover PRISM’s costs. Most of the funding now comes from foundations or government grants and contracts. Participating manufacturers also pitch in, with the amount based on the costs of realizing the innovation the company wants to undertake—about $41,000, on average.
It hasn’t been easy to encourage businesses to invest in product development when the economy remains weak. “We’ve been hamstrung a little bit because of the caution that some companies have, coming out of the recession,” Berry said.
But with its focus on collaboration and innovation, MAGNET is in good company. In northeastern Ohio, entrepreneur-focused JumpStart, technology-focused NorTech, and Youngstown’s National Additive Manufacturing Innovation Institute are all working to improve collaboration and innovation. Harvard Business School professor Michael Porter and other researchers have found that a strong regional network can be a powerful advantage in an increasingly competitive, globalized marketplace.
CORRECTION: An earlier version of this article incorrectly stated the number of units at the Jeremiah Program's St Paul campus. There are 38.
- Lockheed Martin
- San Antonio