John Locke Update / Research Brief

Policies to Put Local Jobs First

posted on in Fiscal Insight, Spending & Taxes
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America has always been a country on the move. Across the ocean, across the continent, and, for decades after the frontier officially closed, Americans have moved away from (and often with) family in search of a better life. Immigrants would arrive in New York or California but would just as soon be in Detroit, Lincoln, Dallas or Las Vegas. Blacks left Jim Crow laws in the South to find extralegal racism in Northern cities. Early Mormons pulled up stakes as an entire community twice before gaining a firm foothold in Utah.

Something happened about a generation ago, however, that ended America’s wanderlust.  The New York Times reports that once-booming suburbs now have flat or shrinking populations as deaths outpace births and companies seek proximity instead of seclusion. Young people have delayed family formation due to lingering uncertainty from the 2007-09 recession and the uneven, but slow, recovery in the decade since.  That phenomenon can be less visible in North Carolina, however, which continues to attract immigrants from other states and countries.

Harvard economist Edward Glaeser has chronicled changes in population and local economies for years. Glaeser, former Secretary of the Treasury Lawrence Summers, and Benjamin Austin detail this change in a new paper they presented in early March at the Brookings Institution.

Growth and incomes in the past would converge as young people moved to cities and manufacturers would add facilities in places with cheaper land and labor. Land-use regulations have inflated the cost of housing in the most dynamic cities, and technological changes have reduced the number of jobs that can be created.

Increased geographic sorting by skill probably reflects a combination of restrictions that stymie the construction of affordable housing and workplace complementarities among educated employees. The innovation of the skilled appears to increasingly employ other skilled workers. Henry Ford’s automated assembly lines depended on tens of thousands of less skilled workers, and, hence, it strongly complemented less skilled labor. Bill Gates’ innovations primarily employed highly skilled software programmers.

Their suggested response is not to introduce a universal basic income regardless of work.  Studies continue to find there is a dignity to work. People without work are two-to-three times more likely to report lower levels of life satisfaction or poor mental health than people with a job, regardless of what the job pays. In short, “Many measures of well-being suggest that not working is a far worse outcome than low-income employment.”

Instead of new ways to ease the pain of not working, the federal government should experiment with subsidies and other policies to increase employment in places that have not produced jobs. They emphasize, “We are notably not calling for local control. … Purely local control over social welfare policy could lead to a race to the bottom where states dismantled their safety nets to get rid of their poorer residents.” In contrast, National Affairs editor Yuval Levin emphasizes a federal government policy of subsidiarity with local governments and non-governmental institutions playing their parts.

Even with central control, the federal government could experiment with policies such as one of targeted subsidies to create jobs in places with more people out of work. These places tend to have a lower cost of living and fewer competing job opportunities to bid wages higher. Glaeser et al. suggest a consistent dollar amount, instead of a percent of income, that would keep the policy’s focus on poor areas. One option would be to make the earned income tax credit (EITC) a monthly payment administered by employers. An experiment would help identify possible sources of fraud and ways to combat it.

Another suggestion would move government facilities to areas with high levels of nonwork, though the authors think these would need to be military facilities based on the number and skills needed for the jobs. Community colleges could benefit from additional funds, particularly if aimed at counseling and employability. The authors also consider experimenting with reduced regulations in entrepreneurship districts to see its effects on business creation and expansion.

North Carolina policymakers could learn from these experiments and adapt some to local conditions east of I-95, in the Sandhills, and in the western mountains. Population growth has slowed in North Carolina, and more communities are shrinking, even as our overall growth continues. State and community institutions will continue to seek possible solutions and experiment with changes that can spur growth and restore dignity to people and places.

Joe Coletti is Director of Oversight Staff for the NC House Majority. Joe is a former Senior Fellow at Locke. Here, he examined fiscal and tax policy. He previously headed the North Carolina Government Efficiency and Reform initiative… ...

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