Smart Growth
Between 1990 and 2000, Baltimore experienced the largest population decline of any American city. Some of the reasons for this decline are obvious. Throughout the decade, violent crime, drug addiction, and weak schools plagued the city without improvement. These evident problems make it easy to overlook another critical reason for Baltimore’s decline — the failure to pursue effective strategies for workforce development and attraction of young talent.

In many American cities, including Baltimore, failing workforce development programs leave thousands of people unemployed and underemployed, even in metropolitan areas with a growing and unmet demand for workers. At the same time, thousands of recent college graduates and young professionals seek opportunities to participate in building strong, diverse communities, but few cities focus on attracting this talent. Cities can thrive by developing these two under-tapped sources of human capital, which will in turn attract companies in search of talent. Unfortunately, most cities, particularly the nation’s older industrial cities, have failed to pursue either strategy with vigor or success. Baltimore is a case study for both types of neglect.

Current Programs Do Little to Address Resident and Employer Needs

Baltimore receives nearly $120 million annually in public funding to support workforce development — activities designed to enhance education levels, employment skills and job readiness, as well as form employer partnerships to increase job placement. These funds should connect Baltimore’s unemployed with businesses’ need for qualified labor, and in turn result in decreased crime and substance abuse, higher rates of literacy for Baltimore’s poor, and an increase in tax revenue for the city. Yet poverty and substance abuse rates have remained high or have grown worse over the past decade, and literacy has not improved. Employers’ difficulties in finding qualified workers have only grown. Overall, the existing workforce development system has failed to produce tangible results.

According to the 2000 Census, Baltimore has a 24% poverty rate — an increase from the 22% rate recorded in the 1990 Census. The Maryland Alcohol and Drug Abuse Administration estimates that there are 60,000 drug-dependent people within the city — nearly one out of every ten city residents. Almost 75% of the city’s adults read at the ninth grade level or lower, and 40% of residents older than 25 lack a high school diploma.

Meanwhile, local companies report a strong and steady need for more qualified employees. According to the Maryland Workforce Educational Needs Assessment Survey, completed bi-annually by the Maryland Business Roundtable, “Half of Maryland employers believe the lack of qualified employees has affected the ability of their firm to do business in Maryland over the past year. This belief is universally shared across different industries and sizes of companies. This concern has grown since the first study in 1997.” As recently as October 2002, the Maryland Business Climate Survey published by the University of Baltimore found that 43% of businesses in the state believe high school graduates do not have the most basic skills to perform their jobs. This crisis will only grow worse as skilled workers in the baby boom generation retire.

The workforce development system has failed to address either residents’ or employers’ needs because funding is fragmented among many workforce development programs. Since there is no coordination among these various programs (or between workforce development and economic development strategies in general), workforce development efforts have failed to substantially improve education or job readiness.

In the 2001 fiscal year, $118.5 million in public funding for workforce development went to eight agencies, as shown in the table below. This total does not include the Baltimore City School System, which spent $850 million in FY2001, or workforce programs in surrounding jurisdictions that add significantly to the overall total.

In and of itself, distributing funds to many agencies is not a problem. However, the different agencies fail to coordinate priorities for the use of these funds — thus undermining the overall effectiveness of the city’s workforce development program. In the long run, this leads to employers departing the city for surrounding suburbs or other regions where skilled workers are readily available.

The few residents who do attain employment through the complex mix of local workforce development programs often languish in service-level jobs with little upward mobility and stagnant wages. Why? Because Baltimore’s economic development strategies have largely focused on creating such jobs. Since the 1970s, Baltimore has spent more than $2 billion in economic development subsidies for tourist facilities alone. Such activities have led to more service jobs, including both high-level professional positions and unskilled entry-level jobs — but few middle-income jobs to replace those once provided by the city’s dwindling manufacturing base. The professional positions remain out of reach for Baltimore’s poor, instead going to high-income workers who tend to live outside city limits. The poor can only qualify for the unskilled positions, which provide little opportunity for advancement — thereby weakening incentives for low-income people to work and participate in the legitimate economy.

An increase in the number of unskilled service jobs also raises the demand for city services without increasing the city’s tax base. Unskilled jobs contribute little in taxes, and pay salaries that fail to cover everyday costs such as health care. For example, a new hotel development in Baltimore recently received $36.6 million in subsidies for a property that created 652 jobs — a total subsidy of $56,179 per job. The average pay of these jobs is approximately $20,000, placing them at the bottom of the local pay scale. A family of four whose prime breadwinner holds such a job would qualify for food stamps, the Earned Income Tax Credit, and the Maryland Children’s Health Insurance Program. The $56,179 that taxpayers paid for each of these jobs creates a need for years of additional public subsidy instead of providing true access to self-sufficiency.

There is little hope for such jobs to become self-sustaining. Since youth and women are increasingly joining the service sector on top of the existing low-income, predominantly minority base, the service sector labor market has become saturated. This saturation effectively minimizes the availability of full-time, year-round work with wages high enough to keep employees above the poverty level.

For this reason, while the number of jobs may increase as a result of tourism-focused economic development strategies, the concentration of new jobs in service industries means that growth doesn’t produce greater personal wealth among city residents. In fact, such low-paid job growth may actually widen structural unemployment gaps and lengthen the distance that residents must travel to leave poverty behind.

The Failure to Attract New Residents

Flourishing, growing cities both create opportunities for existing residents to improve their skills and attract talented recent graduates and young professionals. How do they do it? By improving the quality of the urban environment and maintaining the diversity of their residents. According to Richard Florida, a sociologist at Carnegie Mellon University, top destinations for recent graduates such as Washington, D.C., Seattle, Austin, and San Francisco score consistently high in “every measure of natural amenities, lifestyle amenities, and overall environmental quality.”

Places that fail to attract young professionals hinder the growth of their tax bases, jeopardize future civic leadership, and decrease their ability to attract new companies and help existing companies grow. Traditional economic development strategies that focus on downtown business districts too often maintain the status quo. Such strategies, as exemplified by Baltimore’s economic development programs, focus public funds on subsidizing the rent for downtown companies and building garages for downtown employees. In the long run (even sometimes in a few years), these companies will move if subsidies are the only reason for staying. A strong, young talent base can keep a company in town over the long run far more effectively than massive subsidies.

Hope for Cities

Hope for cities like Baltimore lies in creating an overall economic development plan that incorporates both effective workforce development and an effort to attract young talent. Here are six steps to move cities like Baltimore in the right direction:

1. Regional Workforce Development: A city must have a regional workforce development system. In Maryland, instead of being allocated in concert with regional economic markets, as done in other states such as Massachusetts, workforce development funding is allocated and administered by individual cities and counties. Each jurisdiction is responsible for its own programs, and there is no clear incentive for jurisdictions to work with one another. As a result, businesses — which must work with multiple agencies in multiple jurisdictions — face higher recruiting costs.

Since they can only participate in employment training that is available in their city or county, job candidates also suffer in this system. For example, a city may focus its training on low-paying service positions, while the adjoining county may possess plenty of higher paying jobs in manufacturing. Unfortunately, job seekers in the city can’t get training for the manufacturing jobs — even if they have access to transportation to those jobs. While the federal Individual Training Accounts (ITA) program, which provides job training vouchers usable at any state-approved training provider, has helped improve this situation, the program is chronically underfunded. Increased federal and local funding for ITAs, either through taking funds from ineffective programs or through new appropriations, would help overcome obstacles created by jurisdictional boundaries.

2. Coordinate Resources, then Market Them: Governments need a single, unified strategy to coordinate the funding of workforce development programs. The fragmentation of funding, as in Baltimore, often leads to the creation of ineffective and overlapping workforce development programs. This coordinated strategy must work for government agencies, companies, and job candidates, who often find it difficult to understand and access the many city services. Too often, residents become ‘lost’ after multiple referrals to agencies where services do not fit the candidates’ needs or desires.

“One Stop” career centers, created by the 1998 federal Workforce Investment Act, provide all available services in a central location. Due to poor marketing, however, many residents do not even know these “One Stop” career centers exist. This is partly due to a lack of aggressive outreach on local jurisdictions’ parts, and partly due to the centers' internal incentive structure — which prevent them from serving those in most need. To gain additional funding, federal regulations require the centers to demonstrate unrealistic results. This results in senior staff discouraging those they supervise from accepting participants deemed unlikely to find employment. Too often, instead of being given the opportunity to speak directly with job counselors, those clients who do find the centers are directed to a computer to try an Internet job search.

3. Restructure Economic Development Strategies: Too often, state and local business agencies focus on offering huge subsidies, tax credits, or tax waivers when trying to retain or attract new businesses. In certain situations, this strategy can be effective. But these enormous subsidies, as discussed earlier, are frequently offered at the expense of the people whom they are intended to help.

While cities need new developments like hotels, they should pursue more balanced strategies that use smaller subsidies. The money saved from the reduced subsidies should instead be used to train residents for skilled jobs in fields with labor shortages. Building a base of skilled workers will — over the long term — attract companies that seek skilled labor and pay decent wages.

4. Transportation: Cities must improve public transportation systems. Even when jobs exist, existing transportation systems often fail to make those jobs accessible to residents who cannot afford cars. Long commutes via public transit, bus routes that fail to serve neighborhoods with higher-paying jobs, and bus schedules that do not correspond to companies’ work shifts all make transportation a serious problem for lower-income city residents. For these reasons, many low-income workers often commute one to two hours each way for positions that pay less than $8.00 per hour. The high cost of spending hours daily on a bus — including, for example, additional day care — encourage many low-income workers to choose unemployment over ongoing transportation woes.

In Hartford, Connecticut, local transportation providers, the state transportation department, the metropolitan planning organization, job developers, welfare administration agencies, and associations of business and industry came together in the mid-1990s to form BORPSAT (Bunch Of the Right People Sitting Around the Table). BORPSAT performed a mobility assessment, identifying specific opportunities to improve suburb-to-suburb and city-to-suburb access to employment sites. After the study, the local transit agency extended its hours, implemented new city-to-suburb commuter options, and added new routes to job sites in previously under-served areas.

Transportation leadership can also come from the corporate community. In Columbus, Ohio, Sears, Roebuck and Co. and five other businesses agreed to work together to add new bus service to their facilities. They successfully lobbied for the addition of a new route, but received it on the condition that the businesses would pay for 40 passengers each way whether or not the seats were filled. Since ridership has consistently exceeded that number, the businesses have never paid a cent.

In many cities, underused commuter buses can provide a low-cost solution — “capacity transit.” Luxury buses that carry suburban commuters to and from the city can, in between morning and evening shifts, make additional trips to carry city residents to and from suburban jobs. Costs for this effort are minimal, especially if both urban and suburban employers take advantage of commuter tax credits, which provide federal (and in some cases state) tax deductions for businesses that provide workers with transit passes as part of their benefits packages. Such a system could also help make more service on suburb-to-city commuter routes financially feasible, thereby helping reduce both parking needs in central cities and company costs for employee parking. To succeed, such a program requires the full commitment and energy of businesses and elected officials from multiple jurisdictions.

5. The Talent Attraction and Marketing Office: Cities and states spend millions of dollars attempting to attract large, prestigious companies with significant payrolls, and rarely succeed. Cities, regions, or states could yield enormous gains by attracting individuals instead. Economic development agencies should devote resources to attracting young professionals from regions of the country with high concentrations of universities and young talented professionals. Traveling marketing campaigns sent to these regions could include presentations, followed by job fairs with representatives from area employers.

Of course, such efforts will only succeed if cities themselves become attractive places. Cities must invest in parks and open space, recreational opportunities, transportation, education, and improved police protection to make their cities viable. Cities should also try to build a positive image in the eyes of the local and national public. Marketing campaigns can boost local pride among residents and attract regional residents back to the center city. Image building should also include marketing to image-makers in the entertainment industry in order to receive positive placement in television shows and films.

6. The Retention Office: Like many cities, Baltimore is home to many excellent colleges and universities, but students are rarely courted to stay once they graduate. In fact, the very opposite often occurs — university administrators and organizations often disparage the places they call home. If more students remained in their college towns, the critical mass of educated young people might lead more companies to relocate to such cities. Indeed, this pattern of retention is largely what has allowed Boston to grow into a world-class city over the past half-century. Surveys indicate that a majority of leaders in top local firms came to Boston for college and stayed.

People: Cities’ Greatest Assets

At the turn of the last century, Baltimore was the second largest entry point for immigrants in the United States. This large pool of unskilled labor, together with skilled people from past immigration waves, provided the human capital that, above all else, made Baltimore a vibrant and successful city. Cities like Baltimore must once again recognize that people are their greatest asset, and place among their top priorities both improved workforce development programs for low-income residents and the attraction of talented young workers.

A city that makes this shift will become home to residents with more valuable skills and higher incomes, who pay more in taxes. The increased tax revenue will help the city improve basic services and schools, and cut crime, which will in turn attract more people to the city and better equip the city to help its poor, infirm and otherwise disadvantaged residents. This improved living environment will eventually enable the city's economic development agencies to attract more companies than any subsidies could, and cement the city's role as a place of choice for future generations of young leaders. While this vision demands determined leadership and a patient citizenry, the results of developing a premier workforce are worth the struggle.

by Mike Mitchell  ¶ 7:30 PM