Policy Paper No. 2020-023
Many local labor markets in the United States suffer from low employment rates, but getting people to move out of these distressed areas is difficult. Moreover, moving people to job-rich regions does not help those left behind, as out-migration destroys jobs in distressed areas. A better way to help the residents of distressed areas is through local economic development policies that boost job growth and employment rates in a sustained fashion. Such policies can successfully encourage local business and job growth through business tax incentives, cash grants, or customized public services, such as advice to small businesses, job training, infrastructure development, or development-ready land. However, there is scope for improvement in how local economic development policies are carried out. I highlight the need for approaches that increase the benefits per job created by better targeting job creation to distressed areas and using workforce programs to link unemployed workers with jobs. There are also ways that local development policies could have a lower cost per job created. For instance, tax incentives and cash grants to a few large projects are less cost-effective in creating jobs than providing a broader array of businesses with public services. Needed reforms to local economic development policies are within the power and resources of state and local governments to accomplish on their own. However, federal intervention could potentially help by capping some of the largest incentives, and by providing distressed areas with funding to carry out their development plans.
Economic Strategy Group
ECONOMIC DEVELOPMENT; Local labor markets
Bartik, Timothy J. 2020. "Bringing Jobs To People: Improving Local Economic Development Policies." Policy Paper No. 2020-023. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/pol2020-023