Bloomberg Businessweek (North America)
Areas Left Behind Need The Right Kind of Help From Washington
One of the main themes of President Joe Biden’s approach to economic policy is “place-based” programs—bundles of measures to promote jobs and growth in distressed areas. Through a series of laws passed in 2021 and 2022, his administration has embarked on a remarkably ambitious effort, aiming to spend some $80 billion on this approach.
The president is right that a focus on helping communities most in need is overdue. Carefully executed, such an effort could provide good value for public money. But success depends on more than well-chosen investments, and directly creating good jobs in target locations isn’t enough. Policymakers also need to help workers navigate a rapidly changing labor market by supporting them in developing skills, switching jobs and moving to areas of greater demand.
Skeptics argue that the place-based approach is just plain wrong. Why not shape a business climate that promotes investment and high-wage employment everywhere? The answer is that economic distress often becomes selfreinforcing, trapping people in places with low incomes, high poverty and failing services. Opportunities are diminished, communities break down, deaths and diseases of despair proliferate—and the cycle goes on. Public policy has a vital role in halting and reversing this process.
Recognizing the problem is one thing; solving it is another. Using subsidies or public investment to spur local development is difficult and, the record shows, often unsuccessful. Some of the subsidies included in the Chips Act illustrate the pitfalls. Manufacturing semiconductors in the US (page 31) is expensive by international standards—partly because of regulatory bottlenecks, but also because workers with necessary skills are in short supply. With time, those issues could be addressed. But if they aren’t, the US will find itself perpetually subsidizing uncompetitive production rather than seeding thriving new enterprises.
The administration acknowledges that place-based programs aren’t a one-shot treatment. Success demands many complementary and coordinated initiatives: building necessary infrastructure; attracting private investment; creating clusters of innovation; involving local businesses, colleges, unions and nonprofits. It’s a complex, long-term endeavor. The right mix of interventions will vary from place to place, and it will be years before the results can be judged. Careful evaluation as they move forward is essential.
In the meantime, policymakers should complement placebased initiatives with measures aimed at enabling workers. For instance, the earned income tax credit is widely considered one of the most effective ways of boosting employment and helping the low-paid. Expanding this support in distressed areas—applying sound place-based logic to a different kind of policy—would be a simple and effective way to reduce business costs and help the workers most in need.
One more thing: Justified as the place-based approach might be, it shouldn’t rule out steps to help workers improve their prospects by moving. Easier access to vocational training must be part of the formula. The administration should also urge states to cut the red tape that makes it harder for workers to move from place to place or job to job. It’s good news, for example, that some states have begun to reform their occupational licensing systems, pruning needlessly demanding requirements and recognizing licenses issued elsewhere.
Aiding working families in distressed areas isn’t an either-or proposition—either bring new jobs to them or help them find work elsewhere. The right approach is to do both.