The latest report from Tim Bartik at the W.E. Upjohn Institute for Employment Research recommends creating two targeted block grant programs to raise employment rates in different types of distressed locations. These state-level programs would fund customized business services that encourage job creation and resident-oriented services to help individuals access job opportunities. 

We agree that places that are struggling economically would be better off with more funding for both business and resident services. Investing in yourself – in workforce, infrastructure, and small business supports – is an important Smart Incentives principle. 

How this happens is an important determinant of success. Two elements of the research report are especially interesting for thinking about how to deploy new funding for business and resident services effectively. 

First, the study makes a helpful distinction between distressed local labor markets and distressed neighborhoods, though both are characterized by below-average prime-age employment rates. 

  • In local labor markets [multicounty areas, defined here by commuting zones], the employment problem is due mainly to a lack of local jobs and may be solved by job creation.
  • In neighborhoods [smaller geographic areas, defined here by census tracts], the employment problem is primarily due to impediments to residents’ job access and may be solved by programs that improve such access.

This means that different services are needed for different types of distressed locations.

Business services to promote job creation in local labor markets could include:

  • Improving local worker skills
  • Customizing job training for individual businesses
  • Making more sites available for business development
  • Building infrastructure
  • Providing business advice (manufacturing extension programs, and small business development centers)/ information on how to be more competitive and sell to new markets

Resident services in neighborhoods to promote access to jobs could include:

  • Providing information on job openings
  • Enhancing worker skills
  • Improving access to child care
  • Improving transportation

Second, states can improve the way they direct their spending so that it benefits the places with the greatest needs. The study finds that state targeting of economic development programs by place is “infrequent, low-intensity, and ineffective.” State government block grants are presented as a promising alternative. 

Each grant would be based on per capita allocation tied to baseline prime-age employment and would be designed to increase prime-age employment rates. The grants would be used to provide the services appropriate to each type of distressed place. The article argues that this approach is superior to subsidizing or incentivizing individual jobs to help distressed places because it is more resilient to policy mistakes, is more sustainable, and is more likely to be appropriately weighted toward distressed places. 

Grants that allow local discretion in their use would be powerful in allowing places to tailor services to the needs of their residents and businesses. Programs built around substantial area and neighborhood input would help ensure that funds are directed toward local priorities. Stable, ten-year funding would provide a sufficient time period to see change in the underlying prime-age employment patterns. The estimated cost to states is $30 billion annually. 

To learn more please download the full report, How State Governments Can Target Job Opportunities to Distressed Places, or the accompanying research brief