May 11, 2022
Upjohn Institute Senior Economist Tim Bartik testified today before the U.S. House Select Committee on Economic Disparity and Fairness in Growth regarding his research on strategies to bring job opportunities to people in distressed places. The hearing is titled “Bringing Prosperity to Left-Behind Communities: Using Targeted Place-based Development to Expand Economic Opportunity." Bartik's testimony details how targeted, place-based initiatives can restore local economies and bring jobs to economically vulnerable regions.
Video below is courtesy of the Committee's YouTube page.
Bartik's remarks are below the video. (Download his written testimony for more details.)
Chairman Himes, Ranking Member Steil, and other members of the Committee, thank you for inviting me to testify today.
105 million Americans live in distressed local labor markets, which are metro areas or rural commuting zones that lack sufficient jobs. Fifty-five million Americans live in disadvantaged neighborhoods, where the employment rate is much lower than the rest of their local labor market.
These low employment rates are a key driver of many social problems, including substance abuse, family breakups and poorer child development.
My testimony today argues that these problems can be solved by place-based policies that bring job opportunities to people in distressed places. To do this effectively, we must confront some common misconceptions.
We cannot solve this problem by moving people out of their communities. Because we all have valuable ties to the family and friends of our home places, policymakers cannot get enough people to move to make this strategy work, at any reasonable cost.
Even if this strategy worked, it hurts those left behind. Out-migration reduces local demand enough that jobs are reduced by the same percentage as population, so even with out-migration, the local employment rate in a distressed place will stay low.
What does work? For local labor markets, we can best increase job creation by providing businesses with customized services. Such customized services include infrastructure; customized job training programs; and business advice programs, such as manufacturing extension, that help businesses target new markets.
Based on research, these customized services to businesses have a cost-per-job-created that is less than one-third that of business tax incentives.
Past successful regional programs have used this public services approach to create private jobs. A good example is the Tennessee Valley Authority, or TVA, which from the 1930s on used rural infrastructure and other services to create jobs.
To help distressed neighborhoods, the research shows that enterprise zone programs that only provide tax breaks for neighborhood investments are ineffective in helping the neighborhood’s residents. Preliminary findings for the Opportunity Zone program are similarly negative.
Part of the problem is that neighborhoods are not labor markets. Most jobs located in the neighborhood are not held by neighborhood residents, so plopping jobs down in a neighborhood does not necessarily help a neighborhood’s residents.
What can help a neighborhood’s residents get jobs? Increasing a community’s ability to access good jobs, through enhancing transit or providing reliable cars, and making sure residents can access job training and childcare.
In designing place-based policies, federal policymakers should recognize that “one size does not fit all.” Urban areas have different needs from rural areas. And each area has different industrial bases, amenities, or proximity to markets, which dictate different strategies.
Therefore, the best way to assist distressed places is through a flexible federal block grant that allows communities to target their particular needs. I have proposed using one block grant to help distressed local labor markets, and another to help distressed neighborhoods. A meaningful program to help distressed places would cost about $33 billion annually. After 10 years, such a program would close about one-third of the employment rate gap between these distressed places and more booming places.
Such a program is similar to the Tennessee Valley Authority in per capita spending, but provides help for more regions. We need TVA-levels of assistance to help residents of all distressed places to gain access to good jobs. Such a program would benefit both distressed places and the national economy.