Before the recession began, the national unemployment rate was at 4.6 percent, yet even at that time fifty metropolitan areas had unemployment rates of 6 percent or higher, with eleven experiencing unemployment rates of 8 percent or higher. The recession has deepened, but did not create, these disparities. As the economy recovers, it is critical that the federal government work closely with these metropolitan areas to transform them into engines of growth for the nation.
This proposal focuses particular attention on small and medium-sized enterprises in economically distressed areas, with customized training initiatives, an expansion of federally provided consulting services, and empowerment zones that provide tax credits for businesses and for public service grants. Research has shown that the annual productivity benefits of these programs would be roughly twice the program’s annual cost.
This paper proposes three solutions to bring jobs to distressed areas: customized job training programs for businesses and employees, advice and consulting services through the Manufacturing Extension Partnership program, and a package of grants for local services and tax breaks through a reformed and revitalized Empowerment Zone program. Built on evidence from regional economics research, these policies provide investments and incentives that increase employment and productivity in distressed areas. These programs, directed largely to small- and medium-sized enterprises, can have large effects on worker productivity and business competiveness, encouraging sustained employment and rising wages. Because these programs offer investments in workers, firms, and local services, they provide a higher return on government spending and are more cost-effective than programs that focus on incentives alone.