Federal programs unable to stem inner-city job loss

Stephen Ohlemacher

WASHINGTON — Many of America’s inner cities continue to hemorrhage jobs, despite years of federal programs designed to improve their economies.

Nearly half of the country’s 82 largest municipalities lost jobs from 1995 to 2003, according to a new Harvard University study. By comparison, only one of the surrounding metropolitan areas lost jobs during the same period.

A separate analysis by The Associated Press found that most inner cities targeted by the federal government’s primary urban economic programs lost jobs as well.

In fact, the best-performing cities were not part of the federal empowerment zone and renewal community programs, which provide businesses with billions of dollars in tax incentives to expand and hire workers.

“It’s sobering,” said Michael Porter, a Harvard business professor who did the study for the university’s Initiative for a Competitive Inner City. “It suggests that there are relatively few inner cities that are thriving in the sense of job growth.”

Porter and his team analyzed how many jobs were added or lost in inner cities with more than 50,000 residents. They found that only 10 added jobs at a higher rate than surrounding metropolitan areas. All 40 inner cities that lost jobs did so faster than surrounding areas.

Among the best performing: Jersey City, N.J.; Long Beach, Calif.; Tulsa, Okla.; and Anaheim, Calif. Among the worst: Detroit; Grand Rapids, Mich.; Rochester, N.Y.; and Miami.

Thirty-two of the inner cities studied also had neighborhoods that were designated federal urban empowerment zones or urban renewal communities.

Of those, 12 showed an increase in jobs from 1995 to 2003. Only one, Mobile, Ala., added jobs at a higher rate than the surrounding metropolitan area.

“Whatever these programs were, the research and the experience suggests that their impact was marginal at best,” said Alan Berube, a fellow at the Metropolitan Policy Program at the Brookings Institution, a think tank.

Brian Sullivan, a spokesman for the Department of Housing and Urban Development, said many businesses and communities have benefited from the programs. He said HUD is trying to better promote the tax incentives, especially among small-business owners.

But, Sullivan said, many communities could do more to remove local barriers to development, such as cumbersome regulations.

“We’re not trying to preach to people that you are over-regulating,” he said. “But it is true that in some parts of the country the regulatory climate puts out the unwelcome mat.”

Examples?

“Take your pick,” Sullivan said. “I don’t want to point fingers.”

Economic development experts agree that tax incentives alone will not revive urban areas with chronically depressed economies.

The cities should improve services and schools, build affordable housing and enact reasonable business regulations, Harvard’s Porter said.

“There’s no silver bullet,” he said. “To get it right you’ve got to work on the fundamentals.”

The Clinton administration launched the urban empowerment zone initiative in 1994, designating six zones, in New York, Chicago, Detroit, Philadelphia, Atlanta and Baltimore.

Each was awarded $100 million for a host of programs, including job training, social services and tax incentives for businesses. Fifteen more empowerment zones were designated in 1998, each receiving about $25 million.

A HUD-commissioned assessment of the first empowerment zones found mixed results from 1995 to 2000. Although many individual projects were creating jobs and reviving neighborhoods, the study found no widespread, sustained job creation.

“There is little evidence to indicate that major reform or ‘reinvention’ occurred,” the assessment said.

After President Bush took office in 2001, grants were phased out in favor of tax incentives.

“You can give somebody a one-time grant, but if you can cut their taxes each and every year, that’s serious coin, potentially,” HUD’s Sullivan said.

Today, there are 59 federally designated urban empowerment zones and renewal communities, from Boston to Cleveland to San Antonio and Los Angeles.

But HUD said it has not compiled the necessary data for a comprehensive review.

The department announced in 2002 that businesses in those zones were eligible for an estimated $17 billion in federal tax incentives through 2009. But it is unable to say how many companies are taking advantage of the incentives — or how much money they are saving.

One tax credit, for hiring workers who live in empowerment zones and renewal communities, generated $207 million in credits in 2002, according to the Internal Revenue Service.

Sullivan said HUD is working with the IRS to generate more data on the tax incentives.

(Associated Press)