Academic journal article New England Economic Review

Spatial Factors and the Employment of Blacks at the Firm Level

Academic journal article New England Economic Review

Spatial Factors and the Employment of Blacks at the Firm Level

Article excerpt

The notion that the employment and earnings of blacks might be adversely affected by housing discrimination that limits their residential choices, and by employer decisions to locate away from black neighborhoods, has long been embodied in the "spatial mismatch hypothesis." This hypothesis has been heavily debated over the past 25 to 30 years, and the most recent evidence seems to support the hypothesis. These results also suggest that the negative effects of spatial factors on black employment may have grown more serious over time, as more and more employers relocate away from central city areas where low-income minorities continue to be concentrated.(1)

Still, important questions remain about the magnitude and nature of these spatial effects. For instance, what are the specific mechanisms or processes that limit black access to employment in suburban areas? To what extent is it because blacks frequently lack low-cost and direct transportation to many suburban employers, especially when they do not own their own cars? Do they lack information about these jobs, especially by not having access to informal networks that frequently link workers and jobs? Or are there other factors at work here as well (for example, perceptions of hiring discrimination or local hostility)?(2)

A better understanding of the underlying mechanisms through which spatial factors operate is a precondition for developing appropriate policy responses to the mismatch problem. For instance, many urban areas have developed public transit lines to specifically aid "reverse commuters" who are traveling from central city residences to suburban job sites; but these are likely to be ineffective if firms' proximity to public transit has little effect on their likelihood of hiring blacks.

A variety of other "job mobility" strategies, emphasizing more flexible types of transportation (such as van pools) and job placement services, also are based on the notion that transportation and information are the key barriers to suburban employment for inner-city residents. Alternatively, proponents of "residential mobility" (through improved enforcement of antidiscrimination statutes in housing, rental housing vouchers for inner-city low-income residents, and the like) often argue that these other methods are likely to be insufficient, and that eliminating barriers to minority residential locations in suburban areas must be the top priority.(3)

More generally, all of these approaches assume that spatial factors per se are major independent determinants of black employment and earnings. But a variety of other barriers on the demand side of the labor market seem to limit black employment prospects as well, such as the demand among employers for skilled labor and discrimination against black applicants. The first of these factors clearly seems to be growing more serious over time, thereby reducing the relative earnings and employment of blacks and of the less-educated more generally as overall labor market inequality grows.(4)

Thus, it is possible that improving the access of central city black workers to suburban employers might do little to improve their employment and earnings, if they continue to face these additional barriers to employment. This would especially be the case if the employers who are the least accessible to central city blacks (for spatial reasons) also have relatively high skill demands or relatively strong preferences for whites (or for other nonblack minorities).(5) Yet, few studies of spatial effects have taken account of these other demand-side factors in the labor market.

This study uses data from a new survey of over 3,000 employers in four large metropolitan areas to analyze the determinants of black employment and wages at the firm level. We focus specifically on two factors likely to influence the spatial distribution of black employment: the proximity of firms to the residential locations of various racial groups and the proximity of firms to public transit. …

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