Tax Strategies

Targeting Jobs To Neighborhoods Is Poor Policy—We Have Better Options

As we wrestle with creating better jobs for poor and minority urban residents, we hear calls for tightly targeting economic development on poor communities and neighborhoods.  But research and experience shows this doesn’t work.  There are better ways for cities, states, and the federal government to spend public funds and use labor market interventions to help poor people.

There’s no question residents of poor neighborhoods need more and better jobs.  The unemployment rate in December was 6 percent for whites, but 9.9 percent for Blacks and 9.3 percent for Hispanics.  Job losses in the pandemic are concentrated in low-pay sectors like hospitality and restaurants, while the professional workers in higher-paying sectors have largely recovered their lost jobs and income.

This means concentrated joblessness in many minority urban neighborhoods.  Researchers have created detailed city maps estimating neighborhood unemployment, which is heavily concentrated in poor minority communities.  Reporters summarizing the results say “In New York City, it’s as if parts of the Bronx were experiencing the Great Depression while the Upper East Side faced only modest drops in employment.”  Similar patterns show up in Los Angeles, Chicago, and other cities.

So why not create jobs in those neighborhoods?  Lyndon Johnson’s War on Poverty saw the rise of community development corporations (CDCs), non-profits targeting development in poor communities. CDCs and their funders are dedicated, caring, hard-working people, but they are trying to create jobs in places with cumulative economic, social, and often environmental disadvantages.  Over time, they found greater relative success with housing development rather than job creation.

Valuable new research from economist Timothy Bartik at the Upjohn Institute helps us understand why job creation in poor neighborhoods isn’t the best strategy for helping their residents.  Bartik is our leading economist advocating place-based strategies for distressed people and communities, backed by years of deep and careful research.

His conclusion?  “Job creation policies should target multicounty areas that are local labor markets, encompassing most local commuting flows.”  While respectful of neighborhood job advocates, he finds “which specific neighborhood gets the jobs is less important.”  In an excellent debate/discussion with economist David Neumark, Bartik puts it succinctly:  “Neighborhoods are not labor markets.”

After all, most of us don’t work where we live.  The pandemic has increased work at home for some affluent people, but after widespread vaccination, many of them will go back to the office.

The problem is twofold:  how to create jobs for poor people and how to connect them with those jobs.  In his debate with Neumark, Bartik lists cost-effective economic development policies such as customized job training, business advice, and infrastructure development. 

Bartik and Neumark, like most economists, know research shows the failures of traditional targeted economic development tax subsidies and geographically targeted tax breaks like Enterprise Zones and the Trump-era Opportunity Zones.  These often don’t create any net benefits for the tax expenditures, and fail to provide jobs for poor people, their main policy justification. 

Neumark does advocate a new targeted job subsidy for poor communities and residents, the Rebuilding Communities Job Subsidies program which aims to incorporate lessons from the failures of earlier targeted programs.  Economist Edward Glaeser, a long-time skeptic about place-based policies, now supports an expansion of the Earned Income Tax Credit in distressed regions, although this isn’t limited to jobs in a specific neighborhood or community. 

Other economists point to the success of labor market “intermediaries” to connect people with jobs, often through community colleges or non-profits.  MIT economist Paul Osterman has documented the long-term success of Project Quest in San Antonio, which uses a “dual customer” focus to meet the needs of both poor job seekers and employers.  A variety of successful sectoral training programs like WorkAmerica and non-profit intermediaries like the National Fund for Workforce Solutions have adopted this approach.

We also can make jobs better through public policy—unionization, higher minimum wages, child care and family support, enforcing and expanding anti-discrimination laws, and community benefits agreements (CBAs) that include hiring goals for low-income and minority workers on publicly funded and subsidized projects.

Strong macroeconomic growth and very low unemployment also are necessary.  And economist Pavlina Tcherneva and others have called for a universal jobs guarantee that would be open to all, but in reality would be of most help for poor and excluded workers.

Advocates for the poor have legitimate frustration and anger about chronic unemployment and poverty caused by cumulative and ongoing racism and inequality.  But concentrating limited public dollars and job creation programs on tightly drawn neighborhood programs won’t produce good jobs for their residents.  There are better options, and cities, states, and the federal government should use them.

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