Renewing Economically Distressed American Communities: Deep Recessions Can Put Some Places in a Tailspin for Decades. Some Modest Policies Can Help Speed the Recovery

Article excerpt

All communities do not fare equally well after recessions and other economic shocks. Some bounce back fairly quickly. Others suffer more and take longer to recover--sometimes decades longer. A sluggish return to growth is not always necessary, however. There is evidence that well-targeted policies may be able to speed the pace of recovery.

Buffalo, New York, is one example of a community that has suffered for far too long after an economic shock. In 1950, Buffalo was the nation's 15th largest city, boasting nearly 600,000 residents. It was a nexus of manufacturing and automobile and aircraft assembly and home to the world's largest steel mill. Buffalo's boomtown prosperity radiated out across Great Lakes shipping lanes and railway hubs, and attracted migrants from around the country. In 1970, the president of Bethlehem Steel, the operator of the steel plant, said of the city, "You cant help but believe that a tremendous decade lies ahead."

But three harsh recessions between 1969 and 1982 pushed Buffalo and many other manufacturing-based cities off the path to prosperity. During each recession, manufacturing employment in the United States plummeted by between 9 and 15%. These were not temporary layoffs; jobs disappeared, shifts shrank, and plants closed. Buffalo's steel mill, which had employed 20,000 workers in 1965, was shuttered completely in 1982. That year, unemployment in the Buffalo area, which had been well below the national average for at least a decade, topped 12%. Local income, which was more than 6% above the national average in 1970, is today 9% below the average. When jobs disappeared, so did workers--in droves. By 2000, Buffalo's population had fallen by half. Property values dropped, and neighborhoods crumbled into disrepair, pocked with abandoned homes. More than a quarter of the city's residents lived in poverty.

Today, Buffalo remains distressed, and poverty in the central city is still very high, but the situation is improving. The Buffalo metropolitan area's unemployment rate of 7.6% is below the national average. Employment rates have increased, and income, although still below average, is no longer falling even further. New businesses have moved in. Developers, drawn to low property prices, have started to enter the local real estate market. Families have followed. In 2010, Forbes Magazine called Buffalo one of "America's Best Places to Raise a Family," based on factors such as the cost of living, prevalence of homeownership, median household income, commuting time, crime, and high-school graduation rates.

No city should have to suffer the persistent distress that Buffalo and other cities have endured. It should not take 40 years for a city to recover. But the slow pace of recovery in the wake of the recent Great Recession, compounded by ongoing restructuring in the U.S. economy, raises the troubling prospect of newly distressed communities that will languish for a long time.

Here we draw on economic research to argue that a national economic strategy to aid distressed communities is both appropriate and necessary. There are many opportunities to develop and implement policies that can deliver more success stories and quicker recoveries, even in the wake of a rapidly changing economy We recognize, however, that every community is different and that there is no one-size-fits-all solution for the challenges facing economically distressed communities. We therefore propose a basket of options that could begin the process of restoring good jobs to local workers. Each option follows three approaches: attracting new businesses, aiding displaced workers, and matching workers to jobs.

The problem of distressed communities

Workers and their families living in especially hard-hit communities face a number of challenges. Unemployment in persistently distressed areas often arises from plant closings or mass layoffs associated with declines in specific industries and businesses. …