Pathways to happier Labor Days in Heartland

With Labor Day in the rear view mirror, and dangerous foreign entanglements aside, the biggest and most intractable challenge facing America has to be joblessness, particularly in our inner cities.

The national unemployment rate has dropped from the double digits of the Great Recession, but it is still at those levels in the central cities in the Heartland. Shortfalls in K-12 education, an exceedingly high percentage of fatherless children, guns galore, a glut of foreclosed houses, middle-class flight – they all figure into the witches’ brew that has made parts of big cities in the Midwest virtually unlivable.

Remember back to the middle of the last century to when manufacturing jobs were readily available in the hearts of our big cities. Middle class paychecks produced relatively healthy cities. There was economic stability.

The manufacturing jobs were a magnet for all kinds of people looking for a better life, immigrants, families from southern plantations, people leaving the farm.

In the later decades of that century, job erosion set in. Jobs moved to Mexico and Asia. They moved to modern, single-story factories in the outskirts. And they were lost to relentless and necessary gains in productivity, much as they were lost in agriculture to mechanization a half century earlier.

As responses to central city dysfunction, enormous efforts have been expended to improve educational outcomes, revitalize neighborhoods and to get a handle on the epidemic of gun violence. Job creation has been on the lips of most of our civic and political leaders. Yet, none of the strategies have turned the tide against poverty, drug dealing and related crimes.

Experts on urban dynamics have different priorities for fixing our major cities. In terms of strategic focus and dollars invested, my take is that job creation has to be number one, with education a close second. Those are the two tickets out of poverty.

Nothing is more important statewide and for inner cities like Detroit, Cleveland, Buffalo and Milwaukee than to get job creation right. After decades of old economic development, we know where we get the lowest returns: recruiting from other states or regions (zero sum game); real estate development (fully dependent on health of other sectors); workforce training (a dry hole without available jobs); stimulus spending (ineffective except for strategic infrastructure investment).

What, after decades of efforts, does appear to work as strategic drivers? Here’s my take:

• Funding of expansion of existing companies, with credits and subsidies flowing only after the documented jobs are created.

• Focus of successful and emerging clusters. Iowa and Colorado have rigorously adopted cluster strategies, and they have enjoyed better returns than comparable states, like Wisconsin, that have been less strategic. Iowa’s success with the insurance and financial sectors stand out.

• Improvement of the overall business climate. States and regions that are business friendly in terms of taxes, right-to-work laws, regulations, and attitude tend to do better than more hostile areas. (Wisconsin Gov. Walker and the GOP-controlled legislature will take another whack at the income tax, while states like Illinois are raising rates. They like macro vs. micro economic answers to improve the economic climate. So, don’t expect Walker to roil the already weakened unions with right-to-work legislation.)

• Start-up stimulation. Regions that have learned how to turn their intellectual property from universities and industry into new ventures, the fulcrum for reinventing rusty economies, are winning. Patents and licenses are great. So is the attraction of federal R&D grants. But prosperity flows to the citizenry only when technology-based businesses are born and jobs are created. The biggest investment gap is early stage capital for entrepreneurs. Foundations could shift from poverty strategies to prosperity if they invested in job creation through start-ups. In the end, though, successful private sector leaders need to take charge of start-up dynamics.

• Health care cost containment. States and regions that learn to manage out-of-control health care costs will have money to invest in other priorities. They will have a competitive advantage. Those that let benefit costs run amok will go bankrupt or near-bankrupt, and their economies will be dragged down. The private sector is learning how to manage benefits, so there is a path forward if government managers choose to learn.

If our leaders in strategic positions, public and private, especially those with responsibilities for central cities, chin up to their job creation obligations, future Labor Days will be happier times.

Nothing in a community works very well if jobs are in short supply.

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