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Saturday, November 30, 2013

Developing Communities (Not Just Corporate Profits)

Programs that subsidize businesses that locate in neighborhoods in need of economic development are fundamentally flawed. They fail to understand how neighborhood economies work on the most fundamental level, and rely on an inherently patronizing view of the people who live there. Sometimes I wonder if they are really only meant as a justification for corporate welfare.

We provide incentives at taxpayer expense for corporations to locate their businesses in targeted neighborhoods. Supposedly this will improve access to jobs for the residents in these areas... as if they are incapable of driving or taking a bus or subway to a job in another neighborhood. Nobody has any illusion that affluent suburbs are populated by residents who are well off because they all got jobs in their neighborhood. While affluent professionals are generally understood as mobile workers, the implicit view of low-income workers treats them as place-bound. Conceptually, there is probably some trace of serfdom, where poor workers were attached to the land. There is certainly a heavy legacy of American segregation in this assumption that jobs for residents in disadvantaged communities will be located in those neighborhoods.

What are the jobs we are actually subsidizing in the disadvantaged neighborhoods we are supposed to be helping? They inevitably seem to be primarily low-wage, low-skill retail jobs. While there may be something to be said for "gaining work experience," these positions are certainly not ideal for developing more marketable skills, and the concentration of low-wage jobs is problematic. The economic polarization that comes with such concentration deprives communities of the social networks necessary to help talented individuals find the opportunities to realize their potential.

Yet perhaps these subsidies might still appear somewhat effective if they provided services needed by neighborhood residents. In these terms, perhaps they have a small measure of success. Making it less expensive and more convenient to shop for necessities could be beneficial. Unfortunately, too often the businesses have consisted less of necessary goods and services than retailers selling low-quality fashion that may contribute to poor spending habits. Although we must be very careful about taking a patronizing view that curtails the personal judgement of poor people, it seems hard to justify using public money that might do more good elsewhere to underwrite new temptations.

Probably most important is the question about where the profits are going. Do they stay in the community, or is the money being extracted by outside interests? Since most of the companies locating in these special districts are outside corporations, the subsidies and profits are simply transiting through the neighborhood, with only a very small amount of wealth captured by the community in the form of the low wages paid to the workers.

It's easy enough to see why this works for the companies. The subsidies allow them to serve new markets, or more likely reach the same markets at lower cost, thereby increasing their profits. You can also see why the arrangement could appear beneficial to busy politicians; they can attend ribbon cuttings for sleek new businesses that do provide jobs to constituents who need paychecks. Yet the model perpetuates a contingent workforce and exploits the community through wealth-extracting consumerism. We need a different model.

What we need are programs that actually build wealth in communities. To get started, we need to see communities as networks of interconnected and mobile people, rather than bounded places. Instead of busying ourselves with creating "more jobs," we should be concerning ourselves with how people gain access to the job market, develop their career, and transfer skills and opportunities to the family and friends living in their neighborhood. There are a couple of ways subsidies could be better targeted:

  • Linking the credits to the place of residence of workers, rather than to the place of the business.  Modest subsidies could induce employers throughout the city to give additional consideration to qualified candidates from disadvantaged areas. This could likely be done at lower cost than propping up an entire business locating in a specific area. It would be more stable over time than solutions that rely heavily on a small number of businesses that might fail. It would also integrate these communities more fully into the broader social networks and power structures of the city, instead of keeping them segregated.
  • Providing low-cost loans to business owners who reside in the communities in question. This would not only channel profits back into the local community, but would also help to create community leaders. Special consideration might be given to extending financing for successful local businesses in the district that are looking to expand elsewhere in the city.
  • Incentives for businesses to be located in the targeted neighborhoods could be targeted for specific services that the community needs. Recent programs to address food deserts are a more effective application than generic, scattershot attempts to simply provide a few more jobs.

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