Promise: Investing in Community emphasizes the need to target policies at communities with low employment rates to reduce gaps in economic opportunity while improving the return on public investment.
What we’ve learned
- There are huge differences in the availability of good jobs from place to place, and those differences lead to a wide range of economic opportunities for residents. Distressed places have a lower share of people who have jobs and are in the 25- to 54-year-old age category, a period when most Americans are in their peak working years.
- For distressed local labor markets, the key labor market problem is an overall lack of jobs, which is best addressed by job creation. Targeting distressed places for job creation does more to solve inequalities and boost employment rates than non-targeted approaches.
- Higher employment rates lead to improved job skills, mental health, and reduced substance abuse. These benefits improve residents' employability in the long run and enhance the community as a place to live and raise children.
- Targeting job creation in distressed communities provides four times more benefits than targeting job creation in booming places. In distressed areas, every 100 new jobs can lead to 40 more residents becoming employed who previously were not, while in booming areas, the same number of new jobs results in only 10 more residents being employed, with the other 90 jobs going to in-migrants.
- The most cost-effective way to create jobs is through policies that provide businesses with customized business services rather than only offering tax incentives.
- In booming labor markets, a combination of job creation and targeted policies for non-employed residents — such as job information, training, childcare assistance, and help in securing reliable transportation — is needed to improve local employment rates.
- Targeting distressed areas can be politically challenging, but a formula-based block grant, which targets places using a formula tied to the number of people who need jobs in the place, is a viable alternative.
Examine Economic Distress
Our economic distress interactive map and database are tools for understanding comparative levels of employment opportunity across communities. Why a particular focus on distressed communities? Because there are huge differences in the availability of good jobs from place to place, and those differences lead to vastly different types of economic opportunities for residents. Targeting distressed places does more to solve these inequalities than blindly dispensing aid. As a bonus, focusing on distressed communities leads to greater social benefits per taxpayer dollar invested. Federal, state, and local governments should ask what they are doing via place-based assistance to boost employment opportunities for residents of these distressed places.
Economic Distress Interactive Map |
Explore our Research
Journal Articles/Working Papers
This paper estimates that long-run changes in a county’s prime-age employment rate are significantly affected by labor demand shocks to both the county and its overlying commuting zone (CZ). The overall benefits of labor demand shocks are due more to CZ demand shocks than county demand shocks. A lower preexisting county employment rate increases the effects of CZ demand shocks. Simulations suggest that low prior employment rate CZs, versus higher-rate CZs, will have much larger employment rate effects from demand shocks. Targeting jobs at more distressed counties within a CZ has modest effects, much lower than the effects of targeting jobs at more distressed CZs.
In this paper, estimates are presented on short-run effects of demand shocks on a local labor market’s employment to population ratio (employment rate). Based on the estimates, commuting zones (CZs) better define a local labor market than counties, because both employment and employment rate effects exhibit large spillovers across counties within a CZ. In addition, the estimates suggest that demand shock effects vary, by an amount that is both statistically and substantively significant, with a CZ’s prior overall employment rate.
Using Place-Based Jobs Policies to Help Distressed Communities
Place-based jobs policies seek to create jobs in particular local labor markets. Such policies include business incentives provided by state and local governments, which cost almost 50 billion USD annually. The most persuasive rationale for these policies is that they can advance equity and efficiency by increasing long-term employment rates in distressed local labor markets. However, current incentives are not targeted at distressed areas. Furthermore, incentives have high costs per job created. Lower costs can be achieved by public services to business, such as manufacturing extension, customized job training, and infrastructure. Reforms to place-based jobs policies should focus on greater targeting of distressed areas and using more cost-effective policies. Such reforms could be achieved by state and local governments acting in their residents’ interests or could be encouraged by federal interventions to cap incentives and provide aid to distressed areas.
The Evolution of Local Labor Markets After Recessions
This paper studies how U.S. local labor markets respond to employment losses that occur during recessions. Following recessions from 1973 through 2009, we find that areas that lose more jobs during the recession experience persistent relative declines in employment and population. Most importantly, these local labor markets also experience persistent decreases in the employment-population ratio, earnings per capita, and earnings per worker. Our results imply that limited population responses result in longer-lasting consequences for local labor markets than previously thought, and that recessions are followed by persistent reallocation of employment across space.
Should Place-Based Jobs Policies Be Used to Help Distressed Communities?
Should policymakers seek to increase jobs in particular local labor markets? Yes, but only if these policies are well targeted and designed. Encouraging job growth in distressed places can cause persistent gains in employment-to-population ratios. But our current place-based jobs policies, under which state and local governments provide long-term tax incentives to megacorporations, are poorly targeted and designed. Such incentives are as large in nondistressed areas as in distressed areas, and they are excessively costly. What reforms are needed? First, job growth policies should target distressed areas. Second, tax incentives should be focused on high-multiplier businesses, such as high-tech firms. Third, officials can more effectively promote local job creation by relying less on tax incentives and more on public services. These include customized business services, infrastructure, land development policies, local education, and job training. The federal government can use taxes and intergovernmental grants to discourage city or state officials from giving excessive state and local incentives to the largest firms. The federal government can also provide block grants to state and local governments to provide services that promote job growth in distressed places.
Reports and Policy Papers
How State Governments Can Target Job Opportunities to Distressed Places
The United States has two types of “place-based” jobs problems: low employment rates in 1) local labor markets and 2) neighborhoods. The local labor market problem can be dealt with by targeting distressed local labor markets for job creation. The neighborhood problem can be dealt with by targeting distressed neighborhoods with programs to improve residents’ job access. This report describes the magnitude of these place-based jobs problems and reviews research on the most cost-effective programs to address these problems. The report also reviews current state government efforts to target job opportunities to distressed places, pointing out that such targeting is frequently too modest and poorly designed. As an alternative, this report proposes that state governments adopt two targeted block grant programs: a “Local Job Creation” block grant; a “Neighborhood Employment Opportunities” block grant. The costs, benefits, and distributional effects of these block grants are described.
Broadening Place-Based Jobs Policies: How to Both Target Job Creation and Broaden its Reach
Many places in the United States are distressed in that they have low “employment rates” (employment to population ratios). In my recent report for the Brookings Metro Policy program (Bartik 2020b), I proposed helping the most distressed local labor markets, comprising 15 percent of the U.S. population, by a federal block grant of $11 billion annually to provide public services to create local jobs. The present policy paper outlines how this block grant can be broadened, while remaining targeted. The block grant is broadened by adding $3 billion for more moderately distressed local labor markets, comprising an additional 15 percent of the U.S. population. In addition, the block grant is broadened by adding $4.8 billion for distressed neighborhoods, with about 10 percent of the U.S. population, to better link neighborhood residents with jobs.
Place-Based Policy: An Essay in Two Parts
Place-based policies that increase jobs in local labor markets can have large benefits, but current policies need reforms. Local job growth can have large benefits by increasing local employment-to-population ratios (employment rates). These employment rate benefits are larger if jobs are created in local labor markets that are distressed, or if new jobs are matched to the local nonemployed. Current place-based policies are mostly business tax incentives, provided by state and local governments. These incentives are costly per job actually created by the incentive. More cost-effective job creation are public services to businesses, such as customized job training or business advice or infrastructure. Reforms to place-based policies should increase benefits by targeting distressed areas and the non-employed; and lower costs by placing less emphasis on incentives, and more emphasis on public services to business. The federal government can encourage reforms by capping incentives, and by providing flexible grants for job creation in distressed areas.
Should Place-Based Jobs Policies Be Used to Help Distressed Communities?
Should policymakers seek to increase jobs in particular local labor markets? Yes, but only if these policies are well targeted and designed. Encouraging job growth in distressed places can cause persistent gains in employment-to-population ratios. But our current place-based jobs policies, under which state and local governments provide long-term tax incentives to megacorporations, are poorly targeted and designed. Such incentives are as large in nondistressed areas as in distressed areas, and they are excessively costly. What reforms are needed? First, job growth policies should target distressed areas. Second, tax incentives should be focused on high-multiplier businesses, such as high-tech firms. Third, officials can more effectively promote local job creation by relying less on tax incentives and more on public services. These include customized business services, infrastructure, land development policies, local education, and job training. The federal government can use taxes and intergovernmental grants to discourage city or state officials from giving excessive state and local incentives to the largest firms. The federal government can also provide block grants to state and local governments to provide services that promote job growth in distressed places.
Policy Briefs
How State Governments Can Help Distressed Places
Job Creation Policies Can Raise Local Employment Rates, Especially for Distressed Communities
The Enduring Local Harm from Recessions
Smart Place-Based Policies Can Improve Local Labor Markets
Should We Target Jobs at Distressed Places, and If So, How?
Presentations
Urban/Rural Divide: A Call for Action
Reviving Distressed Communities
Research for Equity in Recovery II: Place-Based Strategies
Op-Eds and Articles
How States Can Bring Distressed Places the Jobs They Need
Helping Distressed Communities with a New Federal Block Grant and Curbs to Excessive Incentives