Recently, there has been increased interest in place-based policies. Such policies target particular places, seeking to increase their jobs.
In the Point/Counterpoint column of the Journal of Policy Analysis and Management, Upjohn Institute Senior Economist Tim Bartik discusses with David Neumark how best to design place-based policies. Bartik argues that place-based policies can make sense—but they need significant reforms.
Bartik focuses on place-based policies that increase jobs in a local labor market, a group of counties such as a metropolitan area. In a local labor market, increasing jobs provides large long-term benefits by increasing local employment to population ratios (“employment rates”).
Employment rate benefits are greater if job creation occurs in a distressed local labor market. Employment rates also will increase more if new jobs are targeted at local non-employed people—for example, by training that links them with new jobs.
Current place-based policies mainly rely on state and local tax incentives to business. Bartik argues that such incentives can work, but are costly per job created.
More cost-effective job-creation policies provide public services to business. Such services include manufacturing extension, which provides advice to manufacturers; customized training, in which community colleges train to a firm’s needs; clean-up of polluted “brownfields”; transportation and other infrastructure.
Reforms to place-based policies should target distressed areas and non-employed people more and rely less on incentives and more on public services to business, Bartik argues, and state and local governments should enact such reforms. The federal government can also encourage reforms by limiting incentives and by providing aid to governments in distressed areas, to help provide needed public services for business development.
While some place-based policies that target a local labor market, others target a particular neighborhood. Bartik agrees with Neumark that these narrower place-based policies often do not benefit the residents of a target neighborhood.
As an alternative, Neumark proposes neighborhood-oriented place-based policies to provide low-income individuals in low-income neighborhoods with subsidized jobs. In his response, Bartik agrees that subsidized jobs programs might make sense, but questions whether eligibility for a subsidized job should be conditioned on a person’s neighborhood.
Targeting jobs at places makes sense if the benefits of jobs vary by place—which they do for different metro areas, but not necessarily for different neighborhoods.
Articles available at JPAM (paywall):
- Smart Place‐Based Policies can Improve Local Labor Markets
- Targeting Jobs Toward the People who Need Them
An Upjohn Institute policy paper, “Place-Based Policy: An Essay in Two Parts,” incorporating the submitted version of both articles, is available for free download:
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