States can improve their efforts to help their most struggling regions and neighborhoods

States spend billions of dollars each year on incentives and economic development programs, but many regions and neighborhoods continue to face economic hardship. Tim Bartik is senior economist at Michigan’s nonprofit WE Upjohn Institute for Employment Research and co-director of the Institute’s Place-Based Policy Research Initiative; for decades his research has focused on local labor markets and state and local economic development policies. Its new report, “How State Governments Can Target Job Opportunities to Distressed Places,” along with a brief overview of how state governments can significantly and affordably increase employment rates in struggling locations.

This interview has been edited for length and clarity.

Q: How big is the problem of “troubled areas”?

Bartique Team

Courtesy of subject

A: About two-fifths of all Americans live in struggling local labor markets, which are multi-county areas with an employment rate – that is, employment-to-population ratio – of at least 5 percentage points below the maximum employment rates that seem economically feasible. And one-fifth of all Americans live in struggling census tracts — those average 4,000 people and are one definition of a “neighborhood” — with an employment rate more than 5 percentage points below average. of their local labor market. These low employment rates cause many social problems: substance abuse, crime and poor child development.

Q: How are the needs of struggling local labor markets different from those of struggling neighborhoods?

A: Struggling local labor markets would simply benefit from having more jobs. By their very definition, local labor markets, such as metropolitan areas or rural commuting areas, are multi-county regions that encompass most resident business travel. Since many people are able to commute to jobs in these areas, cutting jobs anywhere in a struggling local labor market box provide employment opportunities for residents living across the labor market. And research suggests that over the long term, this strategy significantly increases the employment rate in the labor market. Some of these benefits will even go to residents of troubled neighborhoods, but not enough to solve their employment problems.

What residents of troubled neighborhoods need is access to jobs across the labor market. Most jobs in a neighborhood aren’t filled by people who live there, and most people don’t work in the same neighborhood where they live. So when you see neighborhoods with particularly low employment rates, it suggests the problem isn’t a lack of jobs. in these communities, but rather that residents likely face barriers to accessing jobs outside their neighborhoods. This means that simply putting jobs in a struggling neighborhood is neither necessary nor sufficient to increase the employment rate of its residents. Instead, the best way to achieve this is to improve access to employment, broadly defined, to include not only better transport, but also information on job vacancies, vocational training and childcare.

Q: How can states actually create jobs in a local labor market?

A: States should invest in personalized business services, such as production advice and worker training programs, which are more cost-effective than typical state policies that emphasize tax incentives and other cash subsidies as means of encouraging job creation and business investment.

Cash grants are tempting because they are easy to implement and have many political friends. But providing services, which help to overcome the real problems that hinder job creation and access to neighborhood jobs, is more profitable. For example, evidence suggests that the cost per job created for personalized business services is less than a third of that of distributing money to create jobs.

Q: Can states do more to ensure that funding for their job creation and access programs targets areas that need it most?

A: State efforts to geographically target their funding for these programs are limited by politics: the politically easiest thing to do is to provide a similar level of per capita funding to all local labor markets and all neighborhoods, and even trying to take credit for job creation in areas that would have experienced booms without any intervention. To combat these trends, states can structure their funding rules so that the amount allocated to different areas is based on clear and measurable indicators of resident needs. For example, states can allocate dollars to local labor markets based on the gap between a statewide “target” employment rate and the actual employment rate in each local labor market. . My report illustrates how an approach like this could successfully provide at least some funding to almost any area while ensuring that the places most in need receive much higher benefits. In other words, it targets needs within the framework of an almost universal program.

Q: How much would it cost to implement these policies on a large enough scale to have a significant impact?

A: The budgetary costs of “territorial” policies depend in part on the degree to which aid is targeted to areas in difficulty and how quickly you wish to increase the employment rates of these areas. But even the most cost-effective approaches aren’t necessarily cheap. For example, increasing the employment rate of a job will likely cost around $100,000, but this one-time cost of permanently increasing employment is far less than the combined benefits to the individual employed and to society. , including social benefits, such as lower employment rates. substance abuse and crime, and better child development.

To significantly increase the employment rate in struggling locations, simulations suggest that the costs required will frequently be in the range of $100 to $300 per capita per year for at least 10 years. This level of spending is similar to previous programs designed to help distressed places, such as the Tennessee Valley Authority and the Appalachian Regional Commission. In my report, I proposed the cost of a comprehensive location-based program: $30 billion per year nationally, which is slightly less than what state governments currently spend on tax incentives for businesses. But further targeting could reduce costs somewhat. For example, if you only targeted the 15% most in need in the United States, or about 50 million people, and provided funding at the low end of the range, say $100 per person, the annual cost would be around $5 billion. It is unclear which is more politically feasible: a targeted program that provides at least a modest level of funding to almost all places, or a narrowly targeted program that benefits fewer places but would reduce overall costs to states.

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