The Fight Against Urban Job Flight

Fri Dec. 2, 2005 8:18 PM EST

Federal urban renewal programs are in the dumps. Despite intensive efforts by the Department of Housing and Urban Development, inner-city job growth declined in almost half of the country's 82 largest urban areas between 1995 and 2003, according to a new study by the Initiative for a Competitive Inner City. And even among cities that had job growth, most grew more slowly than their surrounding areas. A complementary analysis by the Associated Press found that the majority of inner-cities areas specifically targeted by federal job-stimulation programs also declined.

The ICIC study examined thirty-two areas that received assistance from HUD's Initiative for Renewal Communities and Urban Empowerment Zones (RC/EZ), a program that offers a combination of tax-break incentives and training programs to core inner-city areas with stagnant economies. Of these, only twelve gained jobs and only one, Mobile, AL, did so at a higher rate than outlying urban areas in the eight year time frame. While the RC/EZ program isn't without its isolated success stories, those don't add up to a widespread positive trend in job growth.

Those large cities that escaped the list of job losers are almost exclusively those cities that didn't receive the well-intentioned urban renewal federal aid: Anaheim, Long Beach, San Jose and Oakland, Calif.; Jersey City, Tulsa, Okla., St. Petersburg, Fld., Winston-Salem, N.C, Portland, Ore., and Seattle, Wash. Why is this?

The first question to ask is what drives inner-city job growth. According to the ICIC study, an inflow of immigrants drives job creation. Whereas immigrants compose only 12 percent of those cities that are losing jobs, growing metropolises average 31 percent. In a press release accompanying the study, ICIC founder Michael Porter, a professor at the Harvard Business School, explained:

Immigrants clearly and more readily identify the unique business conditions and opportunities that inner cities offer and are able to capitalize upon them. In addition, they are attractive to small and large businesses seeking willing and available labor.
While less statistically significant, the ICIC study also found that the diversification of industries correlated with job growth, and educational attainment level with higher wages. But policy tools that can affect these factors—creating incentives for diversification and expanding educational opportunities—are tricks that HUD has tried before, again with mixed results.

The Harvard Institute for Strategy and Competitiveness, an organization also directed by Porter, focuses on the microeconomic foundations of development, implying that entrepreneurial solutions are the key.

But the unwelcome answer to stagnant job growth may be neither federal assistance nor a laissez-faire approach. Lost jobs in the metropolises are being gained in neighboring suburban areas that are quickly urbanizing. Between 1990 and 2000, population growth in suburbs was twice that of the largest cities, 18 versus 9 percent. The nationwide decentralization trend isn't necessarily a problem in itself, but urban cores are often the source of technology and idea generation.

Bruce Katz, former HUD secretary from 1993 to 1996, wrote in a 2003 paper that it is primarily the "metropolitan areas without strong central cities…[that] are having so much difficulty making the transition to a higher road economy." Katz also points to "anti-metropolitan" federal policies that retard economic growth. For example:

  • Transportation funds generated in cities funneled for spending in rural areas
  • Concentrating poverty by housing the poor in segregated city blocks
  • Creating prohibitively high costs to new businesses by designating environmental "brownfield" sites in polluted cities
  • While the 1990s saw some corrections on these distorting policies, Katz told Mother Jones that the Bush administration reversed reformative progress in his first term.

    Bush is talking about cutting grants which enable cities to deal with the basic infrastructure issues. What Bush is talking about cutting are the basic community health programs that are not specifically targeted on job creation but create the climate for job creation to occur.

    Nevertheless, for the short term urban development will be shaped by the Bush administration, who earlier this year proposed to cut billions from HUD's buget, which may be a fine stroke against the deficit, but bad for inner city growth after all.

    In Detroit, Michigan, where jobs are down to 345,000 from 735,000 in 1970, more jobs were lost than in any other major city in the nation, about a 19 percent decrease.
    Detroit successfully secured an urban renewal tax-break package in 2001 with the help of Patrick Anderson's consulting group, but it was rejected by the succeeding mayor. Speaking to the Detroit News, Anderson stressed that government hand-outs don't work, but on a local level,

    All you have to do is stroll through downtown Chicago or parts of Washington, D.C., that have been rejuvenated. […] These tend to be cities that get the basics right. They pick up the trash. They keep the criminals off the streets. The lighting works and they have a well-run government that's not at war with the suburbs.
    Katz agrees:
    I think the issue is: why do businesses locate where they do? They locate because of proximity to markets, reliable workforce, a transparent real estate process, a decent tax structure, an efficient government, and information about markets that enable them to take a risk. And after all that, maybe a tax incentive wouldn't hurt but you need to start with the basics.
    He stressed that it's not so much "economic-stimulus" projects that create jobs, but programs that indirectly help job growth by creating an environment for business. This is also where the bulk of federal money goes: including health care, transportation, earned income tax credit.

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