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Rethinking Urban Policy: Urban Development in an Advanced Economy (1983)

Chapter: 6 Investing in the Future of the Urban Labor Force

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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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Suggested Citation:"6 Investing in the Future of the Urban Labor Force." National Research Council. 1983. Rethinking Urban Policy: Urban Development in an Advanced Economy. Washington, DC: The National Academies Press. doi: 10.17226/80.
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6 Investing in the Future of the Urban Labor Force NEW JOBS, MORE JOBS, DIFFERENT JOBS IN DIFFERENT PLACES A substantial investment in human resources will be required if the nation is to take advantage of the opportunities offered by the structural changes that are transforming the economy and the urban system and by the growth in demand for occupations that require information, commu- nications, and interpersonal skills. As the mechanization of work in both manufacturing and services continues and accelerates, all types of urban areas, including those with strong service sectors, will need resilient labor forces if they are to take new economic roles. While the importation of labor for the new jobs and the out-migration of workers who lose "old" jobs are always possibilities, the slower national rate of growth for tra- ditional manufacturing means that the redundant blue-collar workers will not have the same opportunities for migration that once were common- place. The recent recession has had a powerful reinforcing effect on structural change. It has accelerated the decline of the weaker industries and those most vulnerable to international competition. When the upswing of the business cycle occurs, there will be greater growth in the newer industries and occupations particularly those offering new products and services- relative to expansion in the older industries and occupations (Bureau of Industrial Economics, 19821. Many of the jobs that have disappeared 97

98 Rethinking Urban Policy during the recession, particularly in manufacturing, mining, and distrib- utive services, will not reappear when it is over. The new jobs that are created will be predominantly in service occupations. And in manufac- turing, the number and proportion of service jobs will increase, although the absolute number as well as the proportion of traditional production jobs could decline. Many service enterprises, particularly those based on office work, will increase their level of mechanization (Ginzberg, 19821. There will be new jobs, perhaps more jobs, but they will be different, many of them demanding new skills and higher levels of education and training. Many workers will have to acquire new skills continuously to retain their jobs. Unskilled jobs are likely to pay less in relation to other work than similar jobs in the past. Many of the new jobs will not be located in the same places as the old jobs. They will be in different parts of the metropolitan area and distributed in a different pattern throughout the country. Table 7 shows growth rates for selected industries during the last decade and projections to 1990. Because the figures for 1990 are based on past trends, they probably overstate growth in traditional manufacturing and understate growth in electronic technology and services. Major changes in such basic industries as metals and automobiles suggest that there is likely to be more permanent displacement of workers in these industries than is projected, even in an economy that is on the whole resurgent.2 The Geography of Cyclical and Structural Unemployment The geography of the recession is an important factor in restructuring urban economies. Because of the regional concentration of particular in- dustries, the recession has had uneven consequences for local economies. In September 1982, when the nationwide unemployment rate reached 10.1 percent, it was over 20 percent for workers in the steel industry and other primary metals and over 15 percent in the automobile, textile, and lumber industries. No service industry had experienced unemployment rates of over 14 percent, and the rates in communications; finance, insurance, and real estate services; and government were all under 5 percent (New York Times, October 10, 1982:A11. In fact, while employment in all goods- producing industries declined by 5.8 percent between July 1981 and April ~ There is some evidence that technological advances could destroy more jobs than they create (Schwartz, in press). This view is disputed by Levitan and Johnson (1982). 2 From 1979 to 1982, employment in traditional manufacturing industries fell by 11 percent (650,000 jobs) (Congressional Budget Office, 1 982a:8).

Investing in the Future of the Urban Labor Force TABLE 7 Percentage Distribution of Actual and Projected Annual Growth Rates for Employment in Selected Industries 1979- 1990 99 High Low Sectors and Industries 1969-1979 Trend Trend Traditional manufacturing Motor vehicles 0.9 0.5 - 0.7 Textiles - 1.2 0.6 0.2 Rubbera 0.3 0.6 0.5 Iron and steelb —0.7 0.8 0.6 Energy-related Crude petroleum and natural gas extraction 3.0 4.0 3.6 Coal mining 6.7 5.4 4.1 Construction, mining, and oil field machinery 3.4 4.8 2.4 Electronic technology Computers and peripheral equipment 4.6 5.2 4.2 Electronic components 2.9 2.2 2.2 Services Miscellaneous business services 6.4 3.8 2.9 Health servicesC 5.2 4.8 4.1 Professional services 5.1 3.1 2.2 Finance, insurance, and real estate 3.6 2.8 2.2 Total employment 1.9 2.1 1.4 NOTE: The projected low trend assumes a decline in the expansion rate of the labor force, continued high inflation, moderate gains in productivity, and modest increases in real output and employment. The high trend assumes a larger labor force, higher production and productivity, and lower unemployment rates. aIncludes tires, inner tubes, and miscellaneous rubber and plastics products industries. bIncludes blast furnaces, basic iron and steel, and steel foundries and forgings industries. CIncludes doctors' and dentists' services, hospitals, and other health-service industries. SOURCE: Congressional Budget Office (1982a). 1982, service employment actually rose slightly, by 0.3 percent (New York Times, May 18, 1982:D11. Tables 8 and 9 illustrate how these extreme variations in sectoral un- employment have affected particular urban areas. Most of the 20 SMSAs in which unemployment exceeded 12 percent contained high concentra- tions of the industries in the lagging sectors (Table 81. Of these 20 SMSAs, 8 are classified as manufacturing centers in the urban system. Only 3 are regional (diversified service) centers: Mobile, Birmingham, and Spokane. Of the four functional (specialized service) centers, Detroit and Peoria are centers of the automotive and heavy equipment industries.

100 Rethinking Urban Policy TABLE 8 Metropolitan Areas With the Highest Unemployment Rates, July 1982 Unemployment SMSA Rate Classification Rockford 1 9.1 Manufacturing Flint 18.6 Manufacturing Youngstown 18.3 Manufacturing Peoria 15.9 Functional Gary 15.6 Manufacturing Lakeland 15.4 Mining-Industrial Northeast Pennsylvania 15.1 Manufacturing Johnstown 15.1 Mining-Industr~al Duluth 14.7 Mining-Industr~al Detroit 14.4 Functional Mobile 13.6 Subregional Jersey City 13.3 Functional Canton 13.1 Manufacturing Birmingham 13.0 Subregional Huntsville 12.8 Industrial-Military Tacoma 12.8 Educational-Manufacturing Spokane 12.4 Subregional Fresno 12.2 Government-Education Knoxville 12.1 Functional Chattanooga 1 2.1 Manufacturing York 12.0 Manufacturing U.S. average 9.8 SOURCE: Bureau of Labor Statistics ( 1 982:Table D- 1). The effect of cyclical factors on different types of cities is further illustrated by Table 9. Of the 22 SMSAs with rates of unemployment well below the national average (9.8 percent) only l, Lancaster, is a manu- facturing center. The 3 functional (specialized service) centers, Tulsa, Hartford, and Rochester, are centers for energy, insurance (a major service industry), and advanced instruments, respectively. Even with the end of the recession, many cities where declining in- dustries are concentrated will continue to face long-term structural un- employment. Even in areas in which a major restructuring of the economy is well advanced, as in New York City, the introduction of new service jobs does not mean that those who have been laid off from the disappearing manufacturing jobs will find work. Workers for many of the new jobs will be imported from other regions. Skilled and semiskilled workers in areas with concentrations of old-line industries will, in many cases, transfer to consumer service occupations, usually at lower pay and with fewer benefits (<New York Times, May 1 1, 1982:A1, A71.

Investing in the Future of the Urban Labor Force TABLE 9 Metropolitan Areas With the Lowest Unemployment Rates, July 1982 101 Unemployment SMSA Rate Classification Raleigh-Durham 4.4 Government-Education Oklahoma City 4.5 Subregional Harrisburg 5.5 Government-Education Lancaster 5.5 Manufacturing Washington 6.3 Government-Education Minneapolis 6.3 Regional Tulsa 6.3 Functional Denver 6.3 Regional Nassau 6.3 Residential Orlando 6.4 Resort-Retirement Hartford 6.4 Functional Ft. Lauderdale 6.5 Resort-Retirement Newport News 6.6 Industrial-Military Atlanta 6.6 Regional Philadelphia 6.8 Regional Madison 6.8 Government-Education Albany 6.9 Government-Education Pensacola 6.9 Industrial-Military Anaheim 7.0 Residential Rochester 7.0 Functional U.S. average 9.8 SOURCE: Bureau of Labor Statistics (1982:Table D-1). Some workers whose jobs have been terminated will seek to move to areas where they think their skills may be marketable. If those skills are limited to industries or occupations that are declining, relocation is likely to change only the site of their unemployment or underemployment. The American economy may have reached the end of an era in which there was always a good job somewhere for a skilled blue-collar craftsman. Clearly, however, new skills in a wide range of occupations are needed. For example, projections estimate that while demand for machine assem- blers will increase only 27 percent by 1990, demand for data processing machine mechanics will increase by over 157 percent (Carey, 19811. Redundant Labor Estimates of the size of the structural unemployment problem (Table 10) suggest that as of January 1983, depending on the definition used, the number of dislocated workers could vary from 100,000 1 percent of the unemployed to over 2 million—about 20 percent of the unem-

102 Rethinking Urban Policy played (Congressional Budget Office, 1982a). Probably a practical esti- mate for policy-making purposes is 800,000-1,000,000, accounting for most of the workers affected by mass layoffs and plant closings (Congres- sional Budget Of fire, 1 982a:4 11. -These estimates describe only the immediate problem. They do not account for continuing worker dislocation from further changes in the economy and within specific industries over the next decade or so. The problem of redundant labor differs from the problems of temporary unemployment that the nation has faced in the past. First, it is a continuing problem and will exist in periods of prosperity (although it will not be as severe) as well as in periods of economic recession. Second, structural change compounds the impact of cyclical unemployment on skilled work- ers and older workers. In 1982, for the first time in recent history, the rate of unemployment in the skilled trades exceeded the average unem- ployment rate (New York Times, August 8, 19821. Certainly this situation was exacerbated by a prolonged recession that hit construction industries especially hard. Many skilled workers are older. Table 10 shows that 845,000-1,050,000 workers currently affected by structural unemploy- ment are in their mid-forties or older. Some of these workers have skills that are unsuited to the kinds of new jobs that are being created in the growing sectors of the economy. Thus they may have a difficult time finding replacement jobs either in their existing communities or in places to which they might move if their old jobs are not restored as the recession ends. The problem is further complicated by the large concentrations of re- dundant manufacturing workers in middle-sized urban areas with spe- cialized economies. Thus, structural change in a single plant can affect a large percentage of the total local labor force. Even if it is assumed that relocation to another area would increase chances of reemployment, the age of such workers makes migration a difficult option to pursue. Com- munity and family ties, mortgages on existing homes at rates that cannot be duplicated in a new location, and supporting institutions and services in existing communities, unions, and industries tend to inhibit migration. The redundant labor problem in declining industries has both short- and long-term aspects. In a number of areas there is a short-term problem of finding jobs for those who are unemployed, whose unemployment benefits have been exhausted, and whose prospects for being called back to their old jobs or to work in the same firms are at best remote. They may need retraining, relocation, or both. For the long term, there is a need to devise methods of anticipating declining employment or occupational restruc- turing in some industries and to institute programs to retrain and relocate workers whose jobs will be eliminated. In the absence of such programs,

Investing in the Future of the Urban Labor Force TABLE 10 Estimated Numbers of Dislocated Workers in January 1983 Under Alternative Criteria and Economic Assumptions Number of Workers (in thousands) 103 Criteria High Trenda Middle Trendb Single criteria 1,065 880 835 Declining industry 1,700 Declining industry and other 2,165 1,785 1,095 unemployed in declining areae 1,360 1,150 675 Declining occupationf 835 710 845 10 years or more of job tenure 1,050 890 535 More than 45 years of age 760 560 More than 26 weeks of unemployment Multiple criteria Declining industry and 10 years of job tenure 275 225 215 45 or more years of age 250 205 195 26 weeks of unemployment 145 110 100 Declining industry including other unemployed in declining arease and 10 years of job tenure 430 355 340 45 or more years of age 490 395 375 26 weeks of unemployment 330 255 245 Declining occupationf and 10 years of job tenure 235 195 185 45 or more years of age 335 280 265 26 weeks of unemployment 165 120 105 aHigh trend assumes continuation of March 1980-December 1982 growth rates in the number of unemployed workers in each category. Specifically, the number of workers unemployed from declining industries increased by 32 percent in this period a monthly average of 1.4 percent. bThe middle trend assumes that the number of dislocated workers will remain constant from December 1981 to January 1983. The number of dislocated workers in December 1981 is estimated by adjusting March 1980 Current Population Survey totals for changes in the level and composition of unemployment through December 1981. CThe low trend assumes that the number of dislocated workers in each category decreases proportionately with the projected change in the aggregate number of unemployed workers between the first quarter of 1982 and the first quarter of 1983, a reduction of nearly 5 percent. The declining industry category includes all job losers from industries with declining employment levels from 1978 to 1980 (see Bendick and Devine, 1981). elf a declining industry was located in an area defined as declining, all other job losers in the area were included. Declining areas are defined as those experiencing declines in population from 1970 to 1980 or with an unemployment rate of 8.5 percent or higher in March 1980. fThe declining occupation category includes all job losers from occupations with declining employment levels from 1977 to 1980. SOURCE: Congressional Budget Office (1982a).

104 Rethinking Urban Policy structural unemployment is likely to reach beyond the blue-collar ranks into the middle technical and professional levels of many industries, par- ticularly manufacturing, mining, and some services (Ernst, 1982; Gunn, 1982). The New Worker A serious, broad policy issue arising from the restructuring of national and urban economies is the inadequate preparation of those who will enter the labor force in the future. More than in the past, the international competitiveness of the American economy will depend on the quality of its labor force, including its flexibility in shifting to new kinds of work and to new ways of working. The increasing knowledge required by many old and new occupations suggests the need to invest in the education of the present and future labor force. Higher- and middle-level occupations will require advanced scientific and mathematical education, computer competence, and strong verbal skills. Lower-level occupations will require literacy, usually more advanced verbal skills, basic mechanical skills, and some introduction to the use of computers. The information content of many service jobs is increasing as the proportion of unskilled private sector jobs shrinks (Mare and Winship, 19791. Certainly one aspect of this problem involves education in science and mathematics, especially at the secondary-school level. In particular, there is a need for computer literacy, a basic understanding of how to use computers, across the whole population (National Academy of Sciences- National Academy of Engineering, 19821. The problem is, however, far broader and more complex than the education of a new generation of scientists and engineers. It includes the education and training of young people, particularly disadvantaged urban minorities and the poor, for en- trance into and advancement in the economic mainstream.3 The shift in the economy toward service jobs should signal a need for a reorientation of the local educational system to equip more students for entry into that market. Even in such blue-collar industries as transportation and distribution, traditional manual jobs are being replaced by mechani- zation and computer-assisted systems. For a wide variety of nonprofes- sional and nontechnical office and manufacturing jobs ranging from secretarial positions to machinists, some training in computer-assisted work is necessary (Guiliano, 1982:148ff.; Gunn, 1982:114ff.~. 3 Less than 2 percent of the nation's scientists and engineers are black, indicating a serious problem of underdevelopment of a potential source of talent.

investing in the Future of the Urban Labor Force 105 Because of the ways in which work is being reorganized, career ad- vancement may require a worker to change occupations and firms more frequently than in the past. Without better preparation, many workers will be confined to low-level service occupations that suffer not only from low wages but also from rapid turnover and little or no job security. An alternative for some has been participation in the underground economy. Both the occupational and geographic mobility of young workers are restricted by the lack of basic skills and work habits that are needed in a wide variety of jobs. The absence of these transferable skills makes work- ers less marketable and inhibits full or rapid adjustment of regional and national economies. It also often retards the introduction of new technology that can increase productivity and even improve the work environment. The effect tends to be magnified at the local level, particularly in highly specialized manufacturing economies, which tend to be the smaller urban areas. The problems of redundant older workers and the inadequate preparation of younger workers for the kinds of jobs and work environment that will increasingly characterize a more service-oriented and knowledge-based labor market make the quality of the labor force a matter for urgent national attention. Ways are needed to improve the ease with which workers and jobs can be matched, whether by facilitating migration to places where the jobs are or by attracting jobs to where the workers are. Ways are also needed to facilitate the transition of workers from one job or occupation to another, both within firms and between firms,4 to constantly improve the skills of those already working, and to improve and broaden education and training for new entrants into the labor market. LABOR MARKET POLICY OPTIONS The National Market Approach There are strong differences of opinion about the way labor markets work and how policy should address their imperfections. One view tends to rely on the "natural" operation of the economy to produce, over time, the adjustments that will be needed in the labor forces of metropolitan areas. This is essentially the strategy advocated by the President's Com- mission on an Agenda for the Eighties (1980) and the President's Urban Policy Report (U.S. Department of Housing and Urban Development, 19821. Both assume that the labor market works spatially through the 4 To some extent this will require the cooperation of unions and management in redefining jobs and job security arrangements within industries (Piore, 1981).

106 Rethinking Urban Policy migration of industries and workers to locations that are the most eco- nomically advantageous to each. They also assume that these patterns of migration are the consequences of long-term trends that are, for all prac- tical purposes, irreversible, or at least not subject to substantial influence by public policy. The President's commission, for example, argues that "recognition should be made of the near immutability of the technological, economic, social, and demographic trends that herald the emergence of a post-industrial society" (p. 1001. In a similar vein, the 1982 President's commission asserts that "the variety of urban conditions is ultimately traceable to natural geographic features and to decisions and preferences of individuals and firms as they respond to innovations in technology, transportation, and communications, and to changing life-style prefer- ences" (pp. 2-30~. Both reports assume that no form of government intervention will result in as efficient an allocation of labor to jobs as the unfettered operation of the market (U.S. Department of Housing and Urban Development, 1982:2- 161. They also assume that allowing the market free rein will maximize national wealth, which ultimately will result in a higher degree of indi- vidual and urban welfare than any strategy that attempts to redistribute wealth among people or areas on principles of equity (President's Com- mission on an Agenda for the Eighties, 1980:Chapter 51. This approach relies on the idea that, in the long run, market operation will produce a state of equilibrium in terms of both economic sectors and geographical regions. Finally, they assume that in reaching equilibrium, the various market prices whether for products or factors such as land, capital, and labor- will reflect all social as well as private costs. The Local Market Approach Appealing as national market theory is, we feel it overlooks some important aspects of labor market operation and is therefore not a fully satisfactory basis for policy. First, the labor market is not a completely integrated national market but a series of related, but also segmented, urban labor markets (Berry, 19641. There is not one market but many, and they are not equally competitive; they are sometimes referred to as a dual labor market. Workers in one market may have highly imperfect information about other markets and only approximate knowledge of their own. Second, one of the most basic assumptions of simplistic approaches to free market strategy that the forces governing labor mobility are virtually immutable appears erroneous. There seem to be few immutable forces governing geographic patterns of labor mobility. The decline of a particular

Investing in the Future of the Urban Labor Force 107 region and the growth of another are not inevitable, nor are these occur- rences necessarily reciprocals of each other. A short time ago the Frostbelt metropolitan areas were scenes of rapid urban growth, presumably at the expense of the less urbanized South. More recently, many perceived the reverse to be the case as the southern and western states experienced rapid job and population growth. Yet there has been a remarkable revitalization of the New England economy, and although the Midwest has experienced job declines, a continuation of such trends does not appear to be inevitable. A recent study by the staff of the Joint Economic Committee, for instance, found that the Midwest was the region expected to receive the largest percentage increase in new plants and permanent offices of high-tech- nology firms (U.S. Congress, Joint Economic Committee, 19821. Empirical studies of labor markets demonstrate that the most important single factor in labor migration for rapidly growing and rapidly declining areas is the growth or decline of jobs. The location of investment is the critical driving force of regional growth as well as regional differentiation (G. Clark, 19831. Employment opportunity, or at least the perception of opportunity, is a critical factor in urban growth. The flexibility of the local labor market may also be an important factor because the turnover in jobs may increase the number of chances a worker has of being hired or moving up the career ladder in a particular local market. Turnover also seems to explain continued in-migration of workers to declining areas (G. Clark, 1983:Chapter 31. National migration trends seem to be second in importance and to respond to the growth in job opportunities. Thus general background conditions influence the flows of workers between local labor markets. The important consideration seems to be how well the national economy is doing compared with the local economy (G. Clark, 1983:Chapter 31. In times of general unemployment and slow economic growth, labor mi- gration slows. The national trends operate to encourage migration when workers perceive not only that their local economy is stagnant or in decline but also that this condition is sharply at variance with other local economies (G. Clark, 1983:Chapter 31. They are willing to take the risk that moving entails when they see their local economy as weak in comparison with the nation's economy and other local economies. When they see things as bad all over, however, they are more likely to stay put. Third, any interpretation of the operation of local labor markets must be especially cautious in using net migration figures. Such data often obscure more than they explain. The gross flows of workers into and out of an urban area or region provide a far more accurate and useful picture of what is actually happening (G. Clark, 1982a, 1983:Chapter 3; National Research Council, 1982a). Even declining areas continue to have a steady

108 Rethinking Urban Policy stream of in-migrants. In fact, in both declining and growing markets, the differences between arrivals and departures may be quite small. Net mi- gration is almost always the result of a small imbalance between much larger gross flows and therefore is subject to rapid reversal in response to changes in the external environment. Two observations are important to our understanding of the dynamics of labor migration. First, there is a relationship between in- and out- migration. Some observers argue that the best indicator or predictor of out-migration is in-migration (Alonso, 19801. It may be that after a certain urban size has been reached, the cumulative inconveniences of dense urban life induce out-migration. It is useful to remember, at any rate, that fast- growing states like Texas and Arizona have rates of out-migration that are almost as high as their rates of in-migration (G. Clark, 19831.5 These data also help remind us that urban areas rarely grow or decline across the board in all sectors of their economies; in fact, some sectors are growing rapidly while others are declining. Thus we note that the Frostbelt cities have captured more of the growth in producer and headquarters-related services in the last decade than the Sunbelt cities have. The latter, however, have exhibited more growth in manufacturing and consumer services. Rates of in- and out-migration to individual states and urban areas have fluctuated over time. This suggests that workers are adaptable to local and national economic conditions. Matched against the business cycles of the period they cover, these trends show that workers are more likely to migrate in good times than in bad times. Corporate policy is an important factor in migration because corporations are less likely to transfer large numbers of employees during periods of recession. Migration thus does not seem to follow any inevitable pattern or represent responses to long gestation periods. Fourth, for the market approach to work fully, not only must it result in people moving to where the jobs are relocating or being created, but people must also move from the declining areas in which there is surplus labor. That is far from the necessary cumulative outcome of the individual decisions of those who move. Workers appear to end up in places where the jobs are, but they do not necessarily come from places with the highest unemployment rates. There is no symmetry between those who migrate to growing areas and those who migrate from declining areas (G. Clark, 5 On the whole, the population of the Sunbelt states is younger and the fertility ratios are higher than in the Frostbelt states. Combined with higher net migration rates, this produces more rapid population growth. Even if net migration rates were the same, the Sunbelt would still be growing faster because of other demographic reasons (Jackson et al., 1981).

Investing in the Future of the Urban Labor Force 109 19831. Migrants to Texas, for example, are more likely to come from other growing Sunbelt states (including California) than from declining Frostbelt states.6 This appears to result in part from the regionalization and segmentation of labor markets; states contain markets that are more integrated with each other than they are with other regional markets (G. Clark, 19831. The distance a worker must travel to find a new job has a significant bearing on the propensity to migrate. Migration is also sensitive to cyclical conditions. During periods of economic prosperity, the range of migrants tends to increase; during recessions, workers willing to move at all are likely to follow conventional and narrow patterns of interstate migration (G. Clark, 19831. All of this suggests that the market alone is unlikely to solve problems of unemployment that are related to the distribution of workers in the spatial economy, at least within some moderate period of time. Fifth, the assumptions that labor migrates from low-wage to high-wage areas and that the result of such migration is the interregional equalization of incomes are not reliable ones. Empirical research shows mixed results. In some states, average wages fell relative to the nation, while in other states wages rose. The level of unemployment in most states does not appear to affect wage levels significantly. While equilibrium theory cannot be totally rejected, it has not been proved (Ballard and Clark, 19811. In some of the growing states, in-migration did not decrease relative wage rates. In other states, out-migration did not lead to an increase in wages, as theory would predict; rather, the reverse occurred. What is clear from the empirical tests of market theory is that we cannot reliably forecast the results of policy essentially based on it. This brief discussion of the contrast between theories of how labor markets function and the empirical evidence of how they actually seem to function underscores the difficulty of devising policies to deal with the problem in simple terms, such as placing the principal emphasis in urban policy on worker mobility as proposed by the President's Commission for a National Agenda for the Eighties (1980) or as epitomized in the remark that people in declining areas should "vote with their feet." The Places and People Left Behind The most likely out-migrants are middle- to upper-income workers in professional and technical occupations. The higher a worker's occupa- 6 Some migrants move twice (or more), first from areas of high unemployment to moderate- growth areas, then on to high-growth areas.

110 Rethinking Urban Policy tional status, the more likely that employment opportunities are national as opposed to regional or only local (G. Clark, 19834. Job information is better, and the ability to estimate the personal risk involved in migrating is greater for higher occupational groups. In many cases the move is made by professionals to a specific job, not merely to a new region in the hope of finding a job. In other words, the move follows the search for a job rather than being a part of the job search itself. Census Bureau studies of geographic mobility during the last decade show that when an area has a net loss in population, the movers tend to be younger and better educated than those left behind (Bureau of the Census, 19801. The poor are the least likely to move from one metropolitan area to another. When they move, they are the least likely to improve their status and income (Salines, 19801. Employment opportunities are more geographically restricted for low- income workers and potential workers. The market for the labor of the urban poor covers a relatively small segment of an SMSA, let alone an entire region or the nation. This restricted market is a function of workers' lack of information, the cost of searching for jobs over a broad geographic area, the low value of jobs for which such workers are qualified, and racial isolation (Bederman and Abrams, 1974; G. Clark, 1983; Hutch- inson, 1978~. The reluctance of low-income workers to search widely for work can be seen as a rational response to the market choices available to them. The risk of layoffs from low-paid jobs is greater than that for other jobs. Wage differences from changing jobs rarely cover the costs of the searches. Such jobs are also least likely to be unionized or subject to other forms of employment security. This suggests that a submarket for the poor operates in urban areas. It is a market that can operate on an assumption of a surplus of workers with sharply limited mobility (G. Clark, 1983; Clark and Gertler, in press). Although the shutting down of firms and the migration of workers from an area may leave it worse off in economic and fiscal terms, such places continue to function; they depend increasingly on transfers of revenue and income from the more prosperous parts of the state and the nation. Even places that suffer no net loss of jobs, such as New York City or Boston, both of which have had a net gain in jobs in the past five years, can have substantial problems in adjusting to changes in their economic structures. The people whose jobs have disappeared- largely manufacturing jobs- often are not qualified to take the new jobs in services that have been created. Moreover, many of the lost jobs have simply been terminated; they cannot be followed to some new location. The result is that such places experience a period of dual development in their labor markets:

Investing in the Future of the Urban Labor Force 111 rapid expansion of one segment and rapid decline in another, a need to attract in-migrants to fill jobs, while the unemployed or underemployed population grows at the same time (Prial, 1982~. Declining Mobility Finally, any discussion of labor mobility must consider that, for the nation as a whole, mobility rates have been declining slightly (Bureau of the Census, 1982), for a number of reasons. First, the average age of the population is rising, and the baby boom generation is reaching an age at which mobility tends to decline. There is now a smaller number of young people in the most mobile age groups. Second, there are barriers to mi- gration. Housing costs in growing communities are usually higher than those in declining or stable communities, and selling a home in a declining area is increasingly a problem. The number of two-earner households has greatly increased in the past decade, which tends to make job searching in a new community more complex. The second earner also alleviates the impact of unemployment on the household and probably prolongs a de- cision whether to move. Finally, the differences among areas in worker support systems, ranging from unemployment insurance, union contracts containing callback provisions for senior workers, and differences in state welfare benefits, to local schools, churches, and other community groups and affiliations, tend to reduce the propensity of workers to strike out for a new community and an uncertain future (G. Clark, 19831. Taking into account the structural changes in the economy of the nation and its urban areas and the realities of the labor market that we have summarized, there appears to be a need for labor market strategies that can deal with both nationwide and local concerns. One of these concerns is with the ability of workers who are structurally unemployed to move to other jobs, whether in the communities in which they now live or elsewhere in the country. Another is the ability of urban areas to develop, retain, or attract the kind of labor forces they need to perform their eco- nomic functions in the urban system. In this light, urban labor market strategies can be grouped under two headings: mobility strategies and human investment strategies. These strategies are not mutually exclusive; they reinforce each other. They are also related to urban stabilization strategies, which we discuss in Chapter 7. STRATEGIES FOR INCREASING WORKER MOBILITY While there are hazards in expecting any demographic trend to continue, much less be immutable, these trends must be considered in developing

112 Rethinking Urban Policy policies that rely on mobility for their fulfillment. Policy concerned with geographic mobility should focus, particularly for the transitional period, on skilled and semiskilled workers who are most vulnerable to job loss and who have larger investments in skill to protect. The job market for these workers is growing very slowly; in some occupations it is actually shrinking. Craft-centered skills often are not readily transferable to new occupations. Information about job availability is not well developed for use by workers. Skilled and semiskilled workers who are unemployed as the result of structural changes have less likelihood than professional and technical workers of improving their incomes or status by moving to a new community. The likelihood of improving the prospects of unskilled workers is even lower. The Problem of Choice In developing a mobility strategy, it is important to keep in mind that, given a choice, many people prefer not to move, and resistance to moving may be high even among the unemployed. Therefore any mobility strategy is unlikely to cause everyone who theoretically should benefit financially from moving to do so. What can be done is to improve the access to employment opportunities of those who choose to move and to help make mobility a realistic option for workers who might otherwise not move at all or might not move wisely. The central objectives of a mobility strategy should be to increase the freedom of choice for workers and to help match jobs with the people who can fill them. Mobility for workers requires several related elements: reliable infor- mation about available jobs, including levels of pay and the kinds of skills needed to fill them; assistance, ranging from counseling to travel costs, in arranging employment interviews; and assistance in relocating to a new community, including moving costs and some services to help the worker and his or her family adjust to their new surroundings. In addition, workers may need counseling and retraining to enable them to use basic skills or abilities in a related but different occupation and a new work or community environment. Intermarket Job Information Since we already have a sizable redundant labor force that has little prospect of returning to jobs held before the recession, a first step in a worker mobility strategy might be to establish a national job information and displaced worker relocation program. No such service now exists in the United States; in fact, there is no effective interstate or intermarket

investing in the Future of the Urban Labor Force 113 listing service. The U.S. Employment Service (USES) does list jobs avail- able in each state as they are submitted by employers and provides some job counseling. Generally the listings tend to be for lower-paying jobs. The U.S. Department of Labor did conduct a pilot program the Job Search Relocation Assistance Project from 1976 to 1980, which, al- though it involved only 20 states, had a fairly good rate of success in relocating workers (G. Clark, 1983; Westat, 1981~. It provided interarea job information, job search grants, and financial assistance to cover mov- ing expenses to take a new job. The program also succeeded in substan- tially increasing the number of moves made by some groups, such as less educated, blue-collar workers who normally do not migrate as readily as professional and technical or managerial workers (Westat, 19811. This experience contrasts sharply with efforts at job search assistance made by USES under the Trade Adjustment Act program. The program made little difference in the success of its participants (Corson et al., 1979; Newman, 1978~. The Congressional Budget Office suggests that this fail- ure may be attributable to limitations in USES staffing. It concludes, however, that even the limited job referral service provided by USES shortened the unemployment period for both men and women (Congres- sional Budget ( office, 1982a:45~. Job clubs groups of job seekers who meet regularly to aid each other in searching for work have had uniformly high placement rates. More than half the displaced steelworkers in Ohio, for example, have found new jobs through this method (Bruml, 19814. This experience suggests the value of industry, union, and public support for job clubs. Given the diversity in urban labor markets, intermarket information clearly is needed if a higher rate of geographic mobility among structurally unemployed workers is to be achieved. Job market information for the unemployed average-wage and low-wage worker is normally very poor and highly restricted in its geographic extent (G. Clark, 19831. In this light, a disinclination to move is quite rational, even if it results in con- tinued unemployment. Searching for work is costly, and the farther one travels to do it, the more costly it becomes. When the risk of coming up empty handed is high, it makes sense to conserve resources rather than spend them on a fruitless effort (G. Clark, 19831. When relocation costs are considered, unemployment benefits—even given their temporary na- ture are a lower-risk option than moving for many unemployed workers. The Canadian.Job Bank System The experience of job clubs and the USES job relocation assistance program suggests that a well-designed mobility assistance program could

114 Rethinking Urban Policy substantially broaden opportunities for the structurally displaced worker and perhaps for other unemployed people as well. An analogue for such a system can be found in Canada.7 Canadian unemployed workers must register at the local office of the Canadian Manpower Council (CMC) to collect unemployment insurance. As a condition for unemployment benefits, they must look for work in the local labor market. Available to both counselors and registrants are lists of job vacancies in the local area as well as those outside the local labor market. Clients can ask to see the lists of outside job vacancies, which are available on computer throughout the national CMC system in over 500 offices across Canada. Workers who find a job that matches their skills and experience are eligible for a travel grant for an interview. If they are subsequently hired, they can receive a grant covering relocation expenses. For a number of maritime provinces (Newfoundland, for ex- ample) this system has been well used by individuals to find and take jobs in the west. Inevitably, however, the jobs listed with the CMC are relatively difficult to fill. Employers use the CMC when they have trouble filling a job through ordinary channels or when the skills needed are so specific as to require expert screening of qualified applicants. Typically the jobs listed are in semiskilled, craft-oriented trades, but more skilled jobs in most occupational categories are also listed. The CMC system also provides job training, if appropriate, and job counseling, which includes job search skills, aptitude testing, screening applicants with respect to specific skill demands, and even attitude screening. For an individual client the local CMC is a resource for unemployment insurance and a place to search for both local and out-of-town jobs. For employers the local CMC is a means of finding qualified employees without having to advertise either locally or outside the area, to screen potential employees, or even to provide relocation expenses if the best employee comes from outside the local area. The CMC recently placed computer terminals in shopping centers throughout Canada to allow individuals, whether clients or nonclients, to use them at their discretion. Job bank searches with these terminals have been very popular; queues of at least two hours in some localities have been observed. There are two guiding principles behind the Canadian system. The primary principle is that workers should choose whether to relocate. Local 7 Our discussion of the Canadian program relies on G. Clark (1983). In preparing his study, Clark interviewed a number of Canadian officials and observed the operation of the program.

Investing in the Future of the Urban Labor Force 115 CMC offices are reluctant to encourage clients to consider outside listings and will only provide that information on request. Of course in the mar- itime provinces, which have very high levels of unemployment, this notion of choice may be illusory. Although unemployment insurance, with ex- tended benefits associated with the level of local unemployment, and welfare are provided, in many situations in those areas there are few jobs available locally. While the Canadian government has attempted a program of job creation, many of the unemployed in those areas, like their American counterparts, face the prospect of unemployment for long periods of time. By force of circumstances many have to look elsewhere for jobs, and the CMC has played an important role in helping these individuals once the decision has been made to relocate (even if temporarily). As in the United States, relocation expenses incurred by individuals can be claimed on federal taxes. Thus the Canadian government facilitates relocation deci- sions directly and indirectly at levels unknown in the United States. The second organizing principle of this system is distinctly market- oriented in that it seeks to improve the efficiency of labor market trans- actions and thereby to reduce the social costs of potential market misal- locations. By improving the match between employees and employers, the market for both is enlarged and made more responsive. Fortunately, the costs of shifting a worker across the country to a new job are very small compared with the costs to the public of supporting the same worker and family on unemployment. The CMC's key function is to minimize the costs of matching employers and workers from dispersed and heterogeneous local labor markets. The costs of searching and finding jobs have been minimized through the use of computer technology. A second important aspect of CMC policy involves the costs of the orga- nization of production. Mining towns located away from centers of in- dustry and trade have been integrated into the national labor market network through both the listing of job vacancies and the use of relocation grants. Plant closings have also been considered an integral responsibility of the CMC system; cooperative tripartite agreements have been made between companies, unions, and the government, facilitating the transition from employment to unemployment to reemployment. Most important, the CMC system directly addresses the costs of un- certainty in labor market transactions. Search and intonation costs have been reduced. The job bank finds workers and employers and transmits the terms of employment. The costs of negotiation and contracting have also been reduced. The job bank allows comparisons among job offers, terms, and conditions. Interview travel grants speed face-to-face contract- ing. Through screening the CMC is able to reduce potential problems of employee compliance (for example, absenteeism).

116 Rethinking Urban Policy Since unemployment is high in most local labor markets in Canada, transactions that match workers with jobs requiring specific skills related either to a particular industry or to particular modes of operation are represented in high numbers in the CMC system. Opportunities exist for unemployed workers to cross the nation, assisted by the federal govern- ment, to take new jobs and hence reduce their dependence on welfare. By linking mobility assistance to the unemployed, the Canadian govern- ment is able to speed the efficiency of market allocations by linking excess supplies of labor to firms and places with labor shortages. The policy assumes that the initiative must, however, come from the individual worker. It is choice-oriented, unconditional, and seeks to be noncoercive. A National Job Information and Mobility System The Canadian policy may suggest to American policy makers an im- portant way of both facilitating individual choice and reducing the social costs of prolonged unemployment. Modifications to the Canadian system, however, would undoubtedly be desirable in adapting it to the United States. The computer technology is now available to operate it; the most difficult problems would be in setting up and administering such a system. Given the problems in past efforts made through the USES and its often unfavorable perception in the business community, one option would be to design a system through a cooperative process that involves business, labor, and state and local governments as well as the federal government, since all must use it for the system to succeed. A national job information system might operate more effectively if it were established as an auton- omous quasi-private corporation receiving some of its funding from its industrial users. It seems wise to consider integrating the information/ relocation system with the unemployment compensation system, making it a service automatically available to any worker covered by unemploy- ment compensation. Whatever the administrative structure, the important elements are a nationwide information system combined with screening, counseling, travel grants for interviews, and moving expenses. Such a program should be cost-effective. The Congressional Budget Office has estimated that weekly unemployment benefits average $160, while a combination of job search assistance and relocation subsidies cost less than $100 per dislocated worker in most situations (Table 114. Thus, if the program shortens a worker's unemployment period as little as 1.7- 3.8 weeks, as preliminary evidence suggests it would, substantial savings in direct federal outlays for unemployment insurance payments could be achieved (Congressional Budget Office, 1982a:451. By putting people

Investing in the Future of the Urban Labor Force TABLE 11 Federal Costs of Providing Readjustment Services to Dislocated Workers Defined by Selected Criteria, FY 1983 (in millions) 117 Expand Job Expand Subsidize Search Use of Relocation Expand Job Cntena Assistance Job Clubs Expensesa Trainingab Declining industry 79 352 26 549 Declining industry and More than 10 years of job tenure 20 90 10 210 45 years of age or older 18 82 9 192 26 weeks unemployment or more 10 44 5 103 Declining industry including secondary losers 161 714 54 1,113 Declining industry including secondary losers and More than 10 years of job tenure 32 142 16 332 45 years of age or older 36 158 18 369 26 weeks unemployment or more 23 102 11 239 Declining occupation 1W 460 35 717 Declining occupation and More than 10 years of job tenure 18 78 9 182 45 years of age or order 25 112 13 262 26 weeks unemployment or more 11 48 5 112 Plant closings and mass layoffs 68 304 23 474 aAssumes that 50 percent of workers under single eligibility criteria and 75 percent of workers under multiple criteria would remain unemployed after the initial period of job search. bAssumes 10 percent of trainees in community colleges, 45 percent in vocational education, and 45 percent in subsidized on-thejob training. SOURCE: Congressional Budget Office (1982a). back to work in productive industries, the benefits to the national economy should also be positive. Prom the point of view of local governments and their economies, the movement of workers from areas in which their prospects for continued unemployment are high to places in which they can go to work should be beneficial at both ends. The adjustment of new urban areas to new eco- nomic roles should be accelerated, and the fiscal stress of economically distressed areas caused by high levels of long-term unemployment should be reduced.

118 Rethinking Urban Policy National Assumption of Welfare Costs In developing a mobility strategy, national assumption of standards and costs for income and health maintenance programs could be very useful. Standards of eligibility for these programs and levels of payment vary from state to state. They are widely regarded as impediments to mobility of the labor force. Only in a national system in which benefits are rea- sonably equalized for local living costs and available throughout the coun- t~y are people free to choose to migrate and accept the risks of unemployment that such movements often entail. Otherwise, it is not irrational for a worker to refuse to move for an insecure job in a state with a lower level of welfare support and a higher threshold of eligibility than in his or her home state. A second reason for federal assumption of responsibility for welfare is that welfare loads are largely a function of national economic conditions and policies, the costs rising with accelerated unemployment. States and localities have few policy options available to them as means of influencing that load. Since the effects of national recession and prosperity are not evenly distributed among the states, those with the weakest economies are presented with the heaviest burdens at times when their budgets are most vulnerable to other demands (Storey, 1982~. National assumption of welfare financing has been recommended for many years (Hansen and Perloff, 19441. Both Presidents Nixon and Carter sought substantial reforms in the welfare system that would have reallo- cated more of the cost to the federal government. The Reagan adminis- tration, by contrast, has sought devolution of primary responsibility for welfare to the states. The states have, understandably, declined the honor. The current stalemate should be resolved, perhaps in the context of re- negotiating national and state responsibilities under the rubric of the New Federalism. States might well accept Revolution of other programs in return for national responsibility for the welfare program. The benefits to the nation in income gains from increased mobility could conceivably offset some of the cost. Federal assumption of full welfare costs would place responsibility with the level of government with most power to cope with the basic economic forces that affect those costs, freeing the resources of state and local governments for more basic and traditional services, such as education. STRATEGIES FOR INVESTMENT IN HUMAN RESOURCES The quality and resilience of an urban area's labor force are essential to its ability to compete with other areas and to adjust to structural change

Investing in the Future of the Urban Labor Force 119 within its own economy.8 Many would agree with Mills (1981:259) that "a skilled and competent work force is as important to economic growth and well-being as is physical capital." No area can expect to function without some exchange of labor with other areas. But since most workers should not be expected to move except under extreme circumstances, it is highly desirable that both those who stay and those who move be fit for the jobs that exist and that they possess skills or potential that is attractive to productive enterprises. Advancement beyond the most menial jobs requires education and training beyond what can be gained through experience in lower ranks. Workers in industries that are being phased out, even if they possess basic skills and good work habits, need retraining, whether they migrate in search of work or seek other local employment. Retraining and adult education programs are also needed, particularly if current tendencies toward a dual labor market per- sist, so that workers can gain the knowledge and credentials necessary to enter more rewarding careers and to move from the secondary to the primary market. Another problem surfaces as levels of educational attainment rise in the work force at large. Fewer workers will be satisfied with routine, tedious jobs that require little individual initiative, autonomy, or control over the work. We can foresee a major transformation in the nature of work itself, spurred on one hand by the increased skills and training that go into the making of products and services and by better-educated workers with higher expectations for more personally satisfying work on the other. Given the demography of the American work force, with a smaller number of workers entering it in the next two decades than in the last two,9 most firms must become less labor-intensive (Marshall, 19821.'° Even if we assume that the least personally satisfying and financially attractive jobs could be filled with marginally trained American workers or with untrained immigrant labor, such a wide-open immigration policy ~ Regional recognition of the importance of the quality of the work force is illustrated by a recent report of the Twin Cities Metropolitan Council, which concluded that a well-educated labor force and good training institutions gave the Minneapolis-St. Paul area an advantage over others in attracting industry (Metropolitan Council, 1982). 9 The proportion of people ages 16-24 will decline from 24 percent in the 1970s to 19 percent in the 1980s, a drop of approximately 20 percent (Congressional Budget Office, 1982b; also see Drucker, 1981; Marshall, 1982:20-22). ~° An illustration of this can be seen in the difference between U.S. and Japanese fast-food firms. The former are labor-intensive, low-wage, high-turnover enterprises. The latter are more capital-intensive, with higher wages and more job security for workers. Each reflects the current conditions of its labor market.

120 Rethinking Urban Policy seems unlikely to be acceptable except for a relatively short period of time. Moreover, a labor policy that would depend on the persistence of an underclass is highly questionable on both moral and practical grounds. It seems more likely that the practice of exporting labor-intensive parts of industries and the more undesirable jobs to less developed countries will continue (Drucker, 19811. ~~ In addition, there are often strong business as well as social reasons for automating the most dangerous, dirty, and boring jobs to eliminate inefficient performance and employer liability for worker injury and disease. Both business and government thus can justify investment in the quality of the American labor force. Another aspect of this problem is the way work is organized in firms or industries. Reducing the skills required to perform certain jobs by introducing new technology may produce short-term gains in productivity at the expense of serious long-term competitive advantages for both the firm and its employees. To the firm it can mean a loss in the adaptability of its work force and greater vulnerability to changes in the external environment the labor market, product changes, technological advances. To the workers it means a loss in their employability in other occupations and firms. By contrast, work organization that broadens workers' skills makes them more employable and enhances their mobility. From a community perspective a competitive labor force includes more than a supply of cheap labor ready to work in almost any enterprise that can be induced to locate in the vicinity. The "new" manufacturing plants in southern cities that have closed offer many examples of how insecure an employment base such firms provide (Armington and Odle, 19821. Except for labor-intensive businesses such as food services, the growing sectors of the economy and those with the best prospects for future growth tend to require higher skills. They are attracted to areas with a well-trained labor force or with amenities that can help attract one. Because many modern industries need an environment that fosters knowledge in their line of commerce, the presence of education and research institutions that can ensure a high-quality labor force are themselves important factors in the location of such firms. A human resources investment strategy for an urban area, then, requires at least three kinds of investment: (1) investment in the development of basic, transferable knowledge and skills for those entering the labor force; (2) investment in programs to improve opportunities for occupational mo- bility and personal growth for those already in the labor force, including programs that improve the quality of working life and the workplace; and ~~ For an estimate of the extent of such exports to date, see Bluestone and Harrison (1982).

investing in the Future of the Urban Labor Force 121 (3) investment in higher education to prepare professionals and managers for employment in national and international markets and to maintain a mutually supportive role with respect to local and regional educational institutions. The remainder of this section deals with these three kinds of investment. Preparing People for Work The urban educational system is the foundation for any strategy of human resources development. In almost all cities, high priority should be given to the education of the minority poor (Anderson and Sawhill, 1980; National Commission for Employment Policv. 19791. The youth employment rate Is alarming, particularly among black men ages 16-24; in September 1982 it was over 40 percent (Bureau of Labor Statistics, 19821. The employability of young people is encumbered by a 12 percent rate of functional illiteracy for high school graduates. A 1975 study found that 42 percent of black high school students, in contrast with 8 percent of white students, could be considered functionally illiterate (Gadway and Wilson, 1979:151. At least while there is a high rate of unemployment, employers are unwilling to hire functional illiterates or school dropouts (Prial, 19821.~2 Even when they are hired, job retention rates are partic- ularly low for untrained young minority workers (Congressional Budget Office, 19821. This ultimately results in high rates of welfare dependency, low rates of participation in the labor market, and participation in the underground economy (K. Clark, 19821. 13 Problems of this magnitude and persistence clearly signal a need for revisions in urban education systems. The major efforts of the last 15 years in compensatory and remedial education have produced mixed results and a realization of the difficulties that confront even the most imaginative and resourceful educators and school systems. Given the institutional inertia resisting changes in education systems, interim measures designed to improve the preparation of young people for the labor market are needed, as are some alternatives to traditional education and training approaches. It is beyond the scope of this report to deal with such educational issues ~ ~ J . ~ ~ 1 ~ 1 _ . 1 1 · · — 12 For example, over 40 percent of New York City~s high school students drop out. Even fast- food outlets will not hire them when there are high school graduates in the job market (Prial, 1982). 13 Clark (1982) points out that persistent racial segregation in public school systems is at the core of inferior education for blacks.

122 Rethinking Urban Policy in detail. ]4 Our inquiry is therefore limited to discussing how educational and training policies may fit into urban labor and economic development . . pot .lcles. Studies of education and training programs for the unemployed and disadvantaged agree on the primary necessity of developing basic skills that can be transferred from job to job. These must be combined with disciplined work habits and clear rewards for performance (Congressional Budget Office, 1982b). Training and education alone are not enough, as a variety of earlier programs demonstrate (Wurzburg, 19781. Many disadvantaged people need help in entering the labor market and in staying in it. Programs that integrate formal education for the disadvantaged with labor force entry programs appear to be more effective than those that leave people to their own devices to find jobs (Congressional Budget Office, 1982a). The school-to-work transition is difficult for the young, low-skilled worker who has little if any experience in searching for a job or in working. Part- time employment of high school students has proved an effective device for keeping students in school until they graduate, thereby raising their level of basic verbal and mathematical literacy (Mangum, 19821. Work- study programs can also be effective when they are combined with close supervision and regular counseling. In all such programs, placement is an important part of the process. Job search counseling has also proved to be a relatively inexpensive way of increasing the chances that a young worker will be employed and retained (Congressional Budget Office, 1982a; Parkas et al., 1980~. And if initial employment has been condi- tioned on enrollment in adult education or special training programs, success for the worker has tended to increase (Congressional Budget Of- fice, 1982a). The primary burden for basic education and training will continue to fall on the public education system. Private employers have generally not provided basic skills training, although they do provide specific job train- ing. Private and public employers can be effectively involved in public education, however, and several approaches seem to be producing useful results. In the adopt-a-school program, for example, corporations or other institutions participate directly in a school's education program through part-time instruction, visits for students, summer or part-time jobs, job counseling, curriculum development, and donation of instructional ma- |4 See the report from the National Research Council's Committee on Vocational Education and Economic Development in Depressed Areas (Sherman, 1983), which deals with the role of vocational education in distressed urban and rural areas and related issues.

Investing in the Future of the Urban Labor Force 123 serial, such as computers. While the level and quality of participation vary widely and there are problems of maintaining initial enthusiasm and com- mitments after the first year or two, the basic idea of an employer's sharing responsibility for the education and the introduction of a student to the labor force is one that can be built on. Other forms of business involvement with schools are being tried in a number of cities. These include on-site training involving the use of cor- porate classrooms for study of "nonschool" subjects, working with ed- ucators to establish career high schools, and establishing summer youth employment programs, academic and work-based scholarships, career workshops and seminars, and private industry councils to operate federally funded training programs. A more systematic approach in school-busi- ness relations is being tried in Boston. A formal compact developed among the school system, the city government, and the business community sets measurable goals for the schools in improving reading and math skills. Businesses, in turn, agree to provide tutors, counseling, school partner- ships, and, most important, jobs for graduates (Anonymous, The Boston Compact, 19821. Even with substantial help from the private sector, any strategy designed to improve the quality of public education for the disadvantaged will require strong state and federal government financial support targeted sharply on inner-city and other disadvantaged schools. Because enroll- ments are often declining due to lower birth rates during the 1970s, there is a greater opportunity to increase the effectiveness of these schools. There is also a need to make that generation more productive to offset its smaller size. The effective schools movement, which has aimed at reform in individual schools, has demonstrated that it is possible to improve substantially the performance of disadvantaged students in schools with meager resources if improvements are made in administration, teaching, counseling, and community support (Rutter et al., 19791. So far, however, it has been difficult to duplicate these successes, particularly if they have been based on a strong, charismatic educator. Alternatives to traditional public education may also prove effective in some circumstances. Some schools or programs might be operated better under contract to private firms. In such arrangements the public role would change from actually providing the service to ensuring that it is provided. Educational vouchers might also be used by some disadvantaged students to obtain specialized education not offered in the public system or to Is There is some question of whether training operated by private industry councils is more effective than programs in which the government is the prime sponsor (Bendick, 1982:262).

124 Rethinking Urban Policy supplement that of the system. The education might include tutoring in basic subjects, such as mathematics, or various kinds of vocational train- ing.~6 Finally, consideration might be given to creating a few selected residential or specialized schools offering advanced high school programs as a means of developing the potential of exceptional young people when the regular public schools cannot provide an environment that supports their intellectual growth. North Carolina's School of Science and Math- . . emat~cs Is one example. Created by the state legislature, it draws students from the entire state, reflecting the racial, sex, and income distribution of the whole population. It has produced a high percentage of merit scholars while serving as a seedbed for educational techniques that can be used by the regular public schools (Dymally, 19821. Clearly, the public schools will not be able to serve everyone. Seriously disadvantaged young people will continue to need special programs such as the Job Corps. Despite its relatively high cost per enrollee, the success of that program appears to have built a bipartisan consensus in favor of maintaining it as an important direct federal responsibility for training disadvantaged people and placing them in jobs (Congressional Budget Office, 1982b). Military service also remains an important source of basic skill and job training for some young people. Additional attention; might be given to the quality of both regular and reserve training as an integral part of the nation's training strategy. A great deal of experimentation is now going on in education and training programs, much of it in response to the financial distress of school budgets and the simultaneous public demand for improved performance by schools. While much of this activity has been highly creative, and room for experimentation is always desirable in education, one of the tasks of state and local leadership is to begin to use this experience to help organize investments in education and training in ways that contribute to an overall strategy of urban economic adjustment and stabilization. State involvement can be particularly crucial, because no matter how well some communities educate their children, there still may not be enough jobs in a particular local market. If part of the process is conceived as job placement for the young worker, the placement program has to be inte- grated with state, regional, and national systems. New entrants are among the most mobile members of the labor force, and programs should rec- ognize that it is often easier for them to move than it is for older workers. i6 A paid tutoring program could have multiple benefits—e.g., making use of temporarily redundant baby-boom college graduates and developing new skills among undereducated 25- year-olds.

Investing in the Future of the Urban Labor Force The educational system should also be seen as a critical part of the economic development strategy of an urban area. Recent initiatives by Massachusetts and other states to establish stronger vocational education programs illustrate the importance that states are placing on training their labor forces as an integral part of efforts to attract and keep industries (Magarell, 1983~. Since industry tends to be reluctant to provide basic skill training but has increasingly recognized the need for it, the creation of an industry-supported fund, perhaps channeled through a community foundation, might be an effective device for developing industry financial support for the better preparation of young workers and for concentrating those resources where they are most likely to be effective. In addition to support for basic education, such a fund might assist in supporting, jointly with public funds, a system of postsecondary training vouchers. These vouchers could be issued to high school graduates for training or retraining at a time of their choice, provided that they are not eligible for other public subsidies of educational expenses, such as tax deductions or credits. The vouchers could be used immediately after graduation for specialized training or to offset college costs, or they could be banked with interest for training at a later stage of a person's career when a job change was necessary or desirable. One way of looking at this proposal is as an extension of public re- sponsibility for the education process by one year but not necessarily a consecutive year on the theory that the returns to society through greater productivity and earning power will more than repay the cost. Many self- employed professionals are able to deduct their continuing educational costs from their income taxes, thus shifting part of such costs to the public at large. Ordinary workers who are less able to bear the cost, however, have no such opportunity. For most American workers, a tax deduction or credit would have little dollar value, whereas a voucher would allow them to discount the out-of-pocket cost of retraining or a special course to an affordable level. With a long-term decline in the proportion (and in many states the absolute number) of students in regular kindergarten through 12th grade, a postsecondary voucher program would result in a less rapid decline in the proportion of the public budget devoted to education, but would not axiomatically increase education outlays. A supplemental source of funding for postsecondary training might be tax credits for corporations that provide training vouchers to their employees for use in cooperatively funded institutes operated by an industry, a regional association of firms, or a government-industry partnership. Like credits for research and de- velopment, employee training provides a substantial long-term benefit for a small, early cost. 125

126 Rethinking Urban Policy While the proposal at this stage is conceptual, the basic idea is to provide, much as the G.I. Bill did, a flexible opportunity for education that fits individual need and produces a national social benefit. Postsec- ondary vouchers could be used, for example, for regular public vocational training, privately provided training, union programs, and, conceivably, for self-teaching programs such as computer courseware that have been accredited by the appropriate educational or training authorities. Such a program would be to the advantage of industry as well as workers, since it is increasingly obvious that all the jobs that will be created cannot be filled by new recruitment alone. Retraining the existing work force will be a continuing necessity for any industry that hopes to keep abreast of new technology and remain competitive (Mills, 1981:2671. Moreover, as an increasingly important objective of collective bargaining agreements, labor organizations are considering the rights of employees to retraining and to participate in judgments about the introduction of mechanized systems (Levitan and Johnson, 19824. Keeping the Skills and Knowledge of Workers Up to Date We can no longer assume that a high school graduate who does not go to college or some other postsecondary educational program will need no further basic or special training apart from that received on the job. Success in the labor markets of an advanced economy will increasingly entail continuous education as part of a worker's life. It is conceivable that in the l990s some urban school systems will enroll more adults than children. This suggests a restructuring of urban education, with more attention to adult and continuing educational programs, to adult vocational education, and to expanding the role of community colleges. It also suggests changes in the basic social contract involving labor, industry, government, and educational institutions. Redundancy planning should become a normal function of industries and communities.~7 Essentially, redundancy planning means anticipating changes in the economy, markets, and technology and the ways they will affect patterns of employment in the industries located in a community. Such a program would attempt to identify those industries and firms that can be expected to experience substantial changes in their labor re- quirements as a result of shifts in markets or technology, giving emphasis to urban areas in which there are heavy concentrations of such firms. By |7 Our discussion of redundancy planning is based on Drucker (1981:249-251); also see Oreskes (1982:5)

Investing in the Future of the Urban Labor Force 127 anticipating and preparing for transitions, it may be possible to smooth the process for firms, workers, and their communities. Firms that operate in changing markets are often under great pressure from their unions and local communities to maintain practices that may even speed their demise. Workers are understandably anxious about the prospect of losing a job when they have skills but no known prospects of continued employment in their trade and no sense that they may have skills that are transferable to other jobs in the same firm, in another firm in the same community, or to another firm in another community. Redundancy planning also means having preventive unemployment pro- grams available for retraining the dislocated workers and a process set up to place them in new jobs. If established, such a process can ease the transition considerably. Workers can be offered training and new jobs before their present jobs are terminated. A preventive strategy essentially consists of foreseeing the decline of employment in an industry and preparing workers through retraining pro- grams for other types of jobs, preferably new jobs in the same labor market. Such a program has been used, with some reports of success, in West Gerrnany(NationalResearch Council, 1982b:19;Wolman, 1982:1131. Where industries are unionized, contract clauses providing for early warn- ings of permanent layoffs and for job training may become fairly standard, reflecting both a growing sense of corporate responsibility for the welfare of employees and union realization that their members' interests can be protected best if they are assured of gaining and maintaining marketable skills. In many cases this assurance may consist of training in the general verbal and quantitative skills needed to operate computerized equipment or to compete for the better jobs in service industries. While it is reasonable to assume that industries will increasingly accept responsibility for retraining workers who face layoffs, communities should also become involved in redundancy planning. Because many workers would probably prefer not to relocate and because substantial relocation of workers can have a serious ripple effect on the local economy and fiscal capacity, the community should also assume some part of the obligation for redundancy planning and for helping to train and place as many workers as possible in new jobs in the community or within commuting distance. From the perspective of industry, if no redundancy planning or retraining programs exist, decisions to change corporate investment patterns or to introduce new technology will be resisted more strenuously by both work- ers and their community leaders. Redundancy planning should be aimed primarily at workers who have several years of experience but who are well under retirement age. They are the most vulnerable because they have families to support, children

128 Rethinking Urban Policy in school or college, mortgages, and usually strong ties to the community. Redundancy planning may be considered an adjunct to unemployment insurance; instead of providing only a temporary stipend to offset cyclical unemployment, it involves an active program of planning for change, retraining, and placement in the event of structural unemployment. Part of the cost of redundancy planning should be paid by the employer when that is possible. Part may be considered legitimate public investment in the human resources of an area and of the nation. The advantage of such an approach is that it tends to increase the security of workers, allowing technological progress to occur in their industry without unrea- sonable labor resistance. It gives workers more bargaining power in the labor market and more control over their own careers. It helps a community keep its labor force up to date and in a position to compete for other industries that need the kinds of skills for which the labor force is trained. While retraining will make it easier for some workers to move, it can also make it possible for others to stay and be productive or to move up the local employment ladder. The community can then more readily accept change rather than fear it or find itself reduced to spending its funds to buy out a declining industry. It should not be necessary for a community to hit bottom before it can begin to think about itself as a different kind of place. While redundancy planning, including education and training programs and the mobility option discussed above, is the most urgent of the tran- sitional problems raised by structural unemployment, attention must also be given to the continuous training of the workers in a community who take jobs that require a high degree of skill and training. This means engaging the resources of a community for adult education, community college, business-based education, and other education and training in a broader and more intensive effort than has been common. It also involves a higher degree of cooperation among private and public institutions. Computer training and education is clearly a high priority. If computer literacy is to be advanced in the school system, current teachers must themselves become masters of these powerful machines that have become as important to both practical and theoretical thinking as our standard languages and traditional mathematics. Among other groups, office workers are obvious targets for continuing education in computer technology. The scientists and engineers of a community, in particular, must continuously refresh their information and skills with new ideas and technology. In ~8 Rader (1982:18) argues that "computer literacy is essential if a person is to participate fully in an information society, and will be as important as reading literacy."

Investing in the Future of the Urban Labor Force 129 fact, workers of almost all sorts will need to keep abreast of new tech- nology. One cautionary note is important in designing computer literacy pro- grams. Advances in technology are rapid and computers are increasingly usable by people with minimal training in programming. There is thus risk that some forms of computer training could rapidly become obsolete and virtually worthless. This suggests a tiered approach, with a program for almost everyone that emphasizes basic skills and applications a sort of driver training for a wide population of potential users. From the basics, other tiers can be added for education in computer applications, mechanics, and theory. Any effective program in continuous education of a large part of the work force represents a major departure from past practices. We have tended to assume that most of the work force is already adequately edu- cated, so that training efforts represent only a marginal part of the re- sponsibility for the quality of work. Even so, the nation has been spending $40 billion a year on training, and government has been contributing only a little over $9 billion ($4 billion from state and local governments, $5 billion from the federal government) of the total (New York Times, October 17, 19821. This is a low level of commitment in comparison with that of other economically advanced countries. If the United States had a retrain- ing program with an effort equivalent to that of Sweden, for example, it would involve a cost of at least $100 billion a year (Haveman, 19821. Some of the added effort may be paid for by those who receive the training. Even if it were entirely paid by employers and government, however, it could be the most important investment made in the future of an area and of the country (Drucker, 1981 :251~: There is a need, above all, to realize that the labor force of today and even more the labor force of tomorrow—represents a tremendous resource of knowledge and experience which has to be continuously tapped and continuously upgraded. We need to shift from the traditional approach of the nineteenth century which saw labor as a "cost," to the approach which so far only the Japanese have taken, the approach of seeing labor as a "resource" and therefore, as a "profit center" rather than a "cost center." There is a need to organize the human resource around continuous learning and continuous training. The Role of Higher Education If the public school system is the foundation for human resources in- vestment strategies, the urban universities and community colleges are the capstone. They should be considered as centers for investment in the development of human capital (Rudnick, 19821.

130 Rethinking Urban Policy The universities in an urban area are not of a piece. Some are traditional, private institutions; others are truly national or international universities whose mission is scarcely local at all. Perhaps the most important are state or city universities, many of which are part of a multicampus system. The universities of an urban area are internally complex, respond to a variety of external interests, and are often ambivalent about the relationship they should have toward their immediate environment. Notwithstanding the difficulties that they present for participation in an urban strategy, their contribution to such a strategy can be crucial, particularly in the long term. '9 Taking advantage of the potential of the universities, however, requires a sensitive understanding of their institutional limitations and of their many roles in education, research, and public service, regardless of the fortunes of their locations. Thus, many universities will consider themselves as institutions that coincidentally are located in urban settings, while others will characterize themselves as urban universities with a primary interest in addressing the higher education needs of the local population (Brown, 19821. Community colleges and postsecondary technical schools have generally been more aggressive in relating their programs to local labor markets. Universities and colleges are important parts of the local service econ- omy. They can also contribute to the fund of intelligence necessary to formulating local and regional economic development strategies. Our chief interest, however, is in the university's role in developing human re- sources. This involves three functions that are fundamental to the com- petitive position of an area: (1) the education of minorities, (2) the improvement of the primary and secondary educational system, and (3) the continuing education and retraining of professionals, managers, and tech- . . nlclans. The higher education of minority and disadvantaged students has be- come a primary function of publicly supported urban universities and community colleges. These schools enroll large proportions of minority students, many of them graduates of weak secondary schools; low-income students; part-time students; students of older average ages; and a generally high percentage of married and working students (Rudnick, 1982:31~. Despite these difficulties for students and for the institutions that such populations pose, there is a need to support and expand such opportunities and to assist students in completing their courses of study. Higher edu- ]9 For a discussion of the pitfalls of expecting too much from universities and other think tanks in solving urban problems, see Szanton (1981).

Investing in the Future of the Urban Labor Force 131 cation is the surest way to break an intergenerational chain of poverty. It is also necessary for entry into most credentialed occupations. At the same time, the rising educational profile of an area increases its attraction for employers in industries that are expanding and need well-trained workers. A strong university in an attractive city provides a significant competitive advantage. Over time it may even operate as a magnet, draining talent from other places in a cumulative, reinforcing process. Inner-city uni- versities and colleges are important stabilizing forces insofar as they help offset the other competitive disadvantages of inner cities by reducing migration flows. In some cases they can do much more, especially when used as a focus for urban conservation and economic development. In this sense an urban university can do more then Almost ~nv other ~ ~ —^ ~ ~ ~ _ ~ } ~ HA 4_A institution to give an area a competitive edge over places that are not mining the potential of their minority populations for entry into jobs that require advanced training and education. This is a costly role, however. It involves costs that are not imposed on institutions that confine them- selves to traditional approaches to the education of traditional, full-time students with good academic backgrounds. State funding formulas gen- erally do not recognize the differences. States should revise these formulas to provide priority support for higher education of minorities and the disadvantaged. From a programmatic point of view, there is also a need, both in urban universities and in the traditionally black colleges, to provide and promote educational programs geared to the disadvanta~cl Tl~ :~1 _1_ _r 1 ~c~ _ 111~ villa UrULld1 rOle Of uroan unlvers1nes in a human resources strategy is fostering change in the urban school system. The universities have a vested interest in the quality of primary and secondary education; if its quality is high, they can dispense with remedial programs. They will also attract more students who can be expected to do well in college, having received a sound primary and secondary education in science. mathematics, computers, and language. As centers for teacher training and the development of educational theory, universities are beginning to recognize an obligation for direct involvement in local educational systems. For example, a project spon- sored by the Ford Foundation currently involves state university presidents and school superintendents in working relationships designed to increase support for primary and secondary educational imorovem~nt~ anal hazer preparation of students for higher education , _ ~ ~ r _ . . _ . . . v a. . ~ V _ ~ ~ _ A Ultimately, universities should be involved in restructuring the entire urban educational system, including approaches to training and retraining the adult work force. While some aspects of the educational system are not directly associated with higher education, creating new techniques to retrain redundant workers or to motivate and prepare new entrants to the

132 Rethinking Urban Policy labor force requires a strong element of multidisciplinary research and experimentation. Programs created through the association of area schools, businesses, and unions can be major catalysts in the timely reform of both public and corporate training and education.20 Urban universities are also a valuable resource for the private sector in terms of training and retraining professionals and other workers. Uni- versities can develop strong relationships with the private sector through the use of industry professionals in their teaching programs; through re- search and development programs, including industry-sponsored research; and in the analysis of new technologies and related educational needs. Involvement of a university in the economy of its region can be of material assistance in keeping that economy competitive. The experiences of Silicon Valley, the Boston area, and North Caro- lina's Research Triangle illustrate how important university-related eco- nomic development strategies can be. To be sure, the universities involved- Stanford, Harvard and MIT, and Duke and the University of North Car- olina are unique and strong institutions. But many less prestigious uni- versities have strengths that could be harnessed for economic development. They may not be able to generate a Silicon Valley, but they can support other activities that materially improve an area's economy (Sheridan, 19821. To some extent, universities are in competition with advanced education programs offered within industry, programs that in part have been de- veloped because of default by institutions of higher education. Many of these programs could be recaptured by educational institutions, which alone are able to offer the credentials often required for professional advancement. To do so, however, urban universities would have to accept the obligation to provide continuing degree and nondegree education for professionals and to ensure that the quality of these programs matches or exceeds that which industry can provide alone. Universities may also have to be more flexible in allowing industry a sufficient say in the content and methods of instruction for special courses and programs. Particular attention might be given to the educational needs of managers and profes- sionals in smaller, growing firms that lack the capacity to provide in- house education on a par with that provided by large international cor- porations. Universities could provide such programs on a cooperative basis, with smaller firms providing development programs that offer the 20 An illustration of how a university might approach this task can be found in the proposal of Wayne State University to establish a comprehensive education and training program to retool Michigan's automotive work force for new jobs and career mobility (Rudnick, 1982:24).

Investing in the Future of the Urban Labor Force 133 quality of the large corporate career development programs at relatively modest costs for each firm. In this way, university education could also be directly related to local economic growth. SUMMARY The economic fortunes of our urban areas rest on their human capital, which has replaced factors such as natural resources as the major source of comparative advantage among firms and urban areas. That human capital can become as obsolete or inappropriate for competition in an advanced economy as deteriorating infrastructure and antiquated industrial plants and technology. It must be continuously renewed. Most American cities have a large pool of underdeveloped human capital in their existing labor forces and in those people who could enter the economic mainstream in years to come if they are adequately trained and educated. Well-trained workers are, of course, mobile if they choose to be. But a well-trained labor force is also a major attractor of capital. Since, in most instances, capital is more mobile than labor, the development of a region's human resources is probably the most useful investment that it can make in its own future. In this chapter we have recommended that in devising a strategy for investment in its human resources, the nation and its urban areas should first invest in developing the basic knowledge and skills without which a worker cannot function in the economic mainstream. These include a working knowledge of science, mathematics, and computers and, above all, a level of literacy that is functional to the type of society and work environment that will exist. Particular attention should be given to edu- cating and training the disadvantaged youth of the inner city. They rep- resent a substantial resource that the nation cannot afford to waste, particularly as the number of new entrants to the labor force declines from rates of the last two decades. Without training they will operate as a brake on the rest of the economy, requiring expenditures on which no return can be expected. Second, we have recommended that substantial investments be made in maintaining knowledge and skills and in retraining dislocated workers. Redundancy planning should become a regular function of national, state, and urban governments working in combination with industries, univer- sities, and schools. We are particularly concerned with productive older workers who happen to work in industries that must change the nature of the work they offer or even their locations in order to remain competitive or to stay in business at all. Retraining such workers is essential if they are to maintain their incomes and to find new jobs. It is also essential to

134 Rethinking Urban Policy their communities and to industry itself to reduce resistance to economic change and growth. Third, we have recommended that special attention be given to the role that universities might play in a strategy of investment in human resources. Urban universities are in a position that allows them to be catalysts in bringing together the public and private parties necessary to make in- vestment strategies work. Urban universities are also in a position to offer both moral and intellectual leadership in restructuring urban educational systems, in rethinking their own role in preparing minority youth for the new world of work, and in continuously refreshing the knowledge of the professional labor force. As in other topics discussed in this report, these elements are not in- dependent of each other. They are interrelated parts of a strategy of using existing resources to expand economic opportunities and to foster new enterprises and development.

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