Introduction: Goals and Premises
The object of our effort is to devise workable policies to enhance the economic opportunities of poor, inner-city adults and children. Specifically, we seek strategies to accomplish three distinct but related goals:
The primary means to obtain these ends (upon which we focus) is to enhance the development of "human capital:" the bundle of skills (intellectual, interpersonal, communication, and physical), experiences, attitudes, motivation and aspirations that individuals possess. The amount of human capital one acquires is affected by a wide variety of factors present in the environment in which the person develops, beginning with conception. Our challenge is to ascertain where and how state policy might intervene most effectively in this environment.
Our concern is thus with the well-being of individuals, as determined by their opportunities for employment and income from employment We do not, however, assume city residents must be employed in the city. (Indeed, a substantial proportion of employed city residents already works in suburban areas.) Because labor markets are regional in scope, our focus regarding employment must explicitly be on the metropolitan area. Job opportunities for lower-skilled workers are increasingly not located in the central city, and this is a trend that is unlikely to change (though there may be ways of marginally increasing the number of lower-skilled jobs located in central cities). We are not concerned with the revitalization of the city or of city neighborhoods, however, desirable these objectives may be, except insofar as these contribute to improving the employment and income prospects of the poor who live there.
In short, our concern is with people, not with places. However, this does not mean we think place is unimportant. On the contrary, we believe that the place where individuals reside is a major determinant of their human capital acquisition and employment prospects. This is so because the opportunity structure an individual faces varies substantially by place. Residents of inner-city neighborhoods, particularly neighborhoods of concentrated poverty, have lower opportunity (face a lower probability of success in terms of gaining human capital, employment and income) than do people of similar endowments who live in other areas. A poor person growing up in a middle-class suburb is likely to be more successful than a poor person growing up in an area of concentrated poverty in a city, all else equal. Thus, spatial dimensions are critical to understanding the employment and earnings problems of low-income city residents and devising policies to address the problem effectively.
Spatial variations in opportunity structures exist for a variety of reasons. Central city residents are physically distant from the suburban areas of greatest job growth (spatial mismatch). Residents of poor communities in central cities are also less likely to be linked into job networks (and to effective and supportive social networks in general) and to absorb informal job-mentoring or modeling from family members and neighbors who are employed. Consequently, they are less likely to develop the "soft skills" necessary for employability and successful performance in a work environment.. Neighborhood effects - the adverse consequences for an individual that result from living in a poor neighborhood - make it more likely that a resident of such an area will be the victim of crime, will engage in criminal behavior, will drop out of school, will become pregnant as a teenager, and will have lower life-time earnings than would a similarly situated individual in a non-poor area. Finally, there are important place-based variations in the provision of public services that are critical to an individual's personal development and employment prospects (particularly education, health, safety, recreation), and in other institutions that support work (e.g., availability of child care facilities).
In policy terms, place is a critical factor. The traditional "people vs. place" dichotomy is thus a false one if we keep our focus squarely on the ultimate objective - improving the employability of individuals. Place-based policies are relevant to the extent that they bring about changes in place characteristics that affect residents’ acquisition of human capital and thereby improve their employment and income prospects.
While important, place is clearly not the only factor that affects the employment and earnings prospects of poor central city residents. The performance of the regional economy also plays a critical role. A substantial body of research indicates that a high-performing economy results in employment for many poor central city residents who would be unemployed in a poorly performing economy and higher income for some previously employed city residents.
Yet it would be a mistake to assume that economic growth will solve the problems of the central city poor. Even in the context of the current high-performing economy (which is unlikely to be a permanent condition), there are many who are unable to gain stable employment at livable wages. The persistence of non-employment and poor earnings for many, even in the face of strong economic growth, indicates that public intervention will be required. The alternative is the acceptance of a substantial number of people who are unable to support themselves and their families, who are not contributing to the American economy, and who, because they have little stake in the prevailing economic and social arrangements, are a potential source of social instability and unrest. From the national perspective, the non-employment and underemployment of generations of poor residents of central cities represents a staggering loss of potential production and reduces the growth potential and international competitiveness of the American economy.
While public intervention is clearly called for, it is also important to acknowledge that previous mechanisms for public intervention have too often proven ineffective. The focus has been too much on input considerations, agency entitlements and procedural methods rather than on performance – achieving the desired objective. In addition, "programs" have focused independently on many separate parts of the problem rather than on the individual as a whole. A long history of "reform" efforts to achieve "coordination" across programs have almost always proven frustrating. New thinking and strategic approaches focusing on outcomes will be required.
We must acknowledge one further reality. Even with effective public intervention there is very likely to remain some portion of the currently non-employed who, for whatever reasons, will not be expected to gain employment or to do so at a living wage. Maintenance of a social safety net, carefully constructed so that it does not provide perverse incentives to those who are employable, will be necessary.
The Concept of the Opportunity Continuum
Opportunity has two dimensions, one external to the person, the other internal. The external dimension includes contextual attributes of the family, neighborhood, local public services, and regional economy that affect a person’s chances of economic success. The internal dimension consists of the person’s own human capital attributes that affect the individual’s chances of economic success in whatever external context appertains. As we shall explain below, these two dimensions are far from independent. On the contrary, the external context perceived by those in a position to invest in their own or their children’s human capital will crucially affect how much they ultimately invest.
To explain this process, we believe that it is helpful to posit the notion of an "opportunity continuum." The opportunity continuum represents a scale measuring the human capital attributes a person has accumulated, including intellectual, physical, communication, and interpersonal skills, flexibility, motivation, responsibility, ability to learn, attitudes and behaviors regarding work, and experience in the labor force. People at different points on the opportunity continuum can be thought of as having different trajectories for economic success during their lifetime, which we might measure as expected lifetime earnings.
Four generic positions on the opportunity continuum can be noted to provide illustration of the concept:
Individuals can move along the continuum, typically most rapidly as youth or younger adults. A child’s (including before birth) movement along the opportunity continuum is primarily governed by the behaviors of parents and other adults with responsibility for the child’s care, and the capacities of the formal institutions and informal networks through which these adults can marshal resources for investing in the child. Here we have in mind such behaviors as obtaining good pre-natal nutrition, immunizations, reading aloud, or enrolling children in Head Start. As children mature, an increasing share of their movement along the opportunity continuum is governed by behaviors undertaken by themselves. These include gaining more than the legally required formal education and training, informal skills, and job experiences. The influences on the behaviors of such progressively more autonomous individuals increasingly shift away from parents and primary care givers towards peer groups and a wide variety of private and public institutions, systems and markets.
For those on point A and, to some extent, point B of the opportunity continuum, the initial step into employment is the most important and the most difficult. Additional advances along the continuum are correspondingly less difficult once stable attachment to the labor force is achieved.
At each point on the opportunity continuum, the potential earnings trajectory is greater in a high-performance regional economy than in a low-performance one. However, while a high-performance regional economy is likely to make it easier for those at points A and B to achieve the first step of gaining employment and for those employed to move modestly up the continuum by gaining more experience and on-the-job skills, most of the income gains from economic growth are likely to accrue to those already at points C and D of the continuum. As shown in Figure 1, the profile of expected lifetime earnings associated with various positions on the opportunity continuum in a low-performance regional economy are shown as line XX; those for a high-performance economy are shown as YY. (It should also be noted that as the structure of the economy changes, the potential lifetime earnings representing success for those at each point on the continuum may change. Clearly this has been occurring during the past 25 years, with the degree of potential economic success associated with the human capital characteristics of those at points A and B falling relative to those at points C and D.)
Restating the Human Capital Development Problem
Some individuals stop their human capital development at a much lower point on the opportunity continuum than others. As a result, they have a lower trajectory of expected lifetime earnings: they are more likely to not participate in the labor force regularly, and will more often be unemployed and poorly compensated when they do participate. Regardless of the external dimensions of opportunity present, such peoples’ chances for success will be constrained by their personal human capital characteristics.
This is not necessarily a social problem, inasmuch as some people have inferior genetic endowments compared to others, and thus it may be infeasible for them to advance as far along the opportunity continuum. However, many people do not advance along the opportunity continuum as far as their endowments would permit. It is this "wasted human potential" which constitutes the heart of the human capital development problem, as we see it, both in terms of the individuals themselves and in terms of the productivity and competitiveness of the national economy.
Why Don’t Some Achieve Their Maximum Potential Human Capital?
To understand the answer to this question, consider a schematic model of the determinants of a person’s ultimate position on the opportunity continuum. See Figure 2.
As explained above, one’s position on the opportunity continuum is a function of that person’s bundle of human capital attributes. Some of these are indelible in the sense that they are genetically determined. Others are indelible after they occur, such as physical or mental conditions that result from accident or illness. In a sense, a person’s past history is indelible as well (in that it cannot be altered) and some aspects of an individual’s history – e.g., a criminal record – may well affect their employability potential.
But most of a person’s bundle of human capital attributes are malleable: subject to modification during the lifetime of the individual. (Indeed, much of a person’s past, including, in some cases, accidents and illnesses, was malleable in the sense that different choices, either by themselves or by others – e.g., their parents – could have resulted in a different set of human capital characteristics.) When people fail to acquire the bundle of malleable characteristics appropriate for their indelible characteristics, we have a social problem of under investment in human capital. It is this set of malleable attributes that potentially are the concern of public policy makers, since they are susceptible to public policy.
Consider them in more detail:
The Role of Place in Shaping the Acquisition of Human Capital
All the above reasons for variations in the acquisition of human capital are strongly influenced by place, although the geographic scale over which different aspects of place operate vary.
At the smallest geographic (often neighborhood) scale we have:
At a somewhat larger scale, typically that of a municipal jurisdiction, we have:
And at the largest, regional scale we have:
When the above spatial elements work effectively in concert to provide:
then we call such a place an effective "launching pad of opportunity."
Places that are effective launching pads provide a context in which individuals will "do the right thing." In such places they will see it in their own self-interest to move farther along the opportunity continuum (and thereby benefit society as well) and thus will engage in a distinctly different set of behaviors at various stages in their lives.
Were we to compare the impacts of two neighborhoods comprising a larger geographic area that differ in their effectiveness as a launching pad of opportunity, we might see a situation like that portrayed in Figure 3. If we were to consider a group of individuals who resided during their entire lives in a neighborhood having ineffective support for human capital development, their distribution of opportunity trajectories ultimately achieved might well be reflected by the first distribution shown in the foreground. A disproportionate number would acquire little human capital, therefore the distribution of individuals in this neighborhood by position on the opportunity continuum would be skewed to the left. We believe that the situation facing residents in central city neighborhoods with high concentrations of poverty may be represented in this way.
Compare this to an equal number of people who have the same initial genetic endowments as the prior group, but are developing in a neighborhood that supports human capital development more effectively. This latter group would have much higher likelihood of moving farther along the opportunity continuum. Thus, the distribution of individuals by opportunity trajectory in the launching pad neighborhood would be shifted considerably to the right of that from the previous neighborhood. Such a distribution is portrayed in the middle of Figure 3.
It is true that in a high-performance economy a greater proportion of individuals in both neighborhoods will move farther along the opportunity continuum. But, as noted before, while the result will be moving more people at point A past that first step of the continuum– employment, it will move those already at points C and D to a much higher trajectory in terms of gains in lifetime earnings.
Implications for Public Policy
What all this means for the policy goal of encouraging more people to acquire human capital appropriate to their endowments: try to shift the total distribution of individuals in a city or metro area as far as possible to the right on the opportunity continuum. Now we can try to do so by doing ONE thing to "invest in the individual," like pairing a kid with a mentor, or providing after school enrichment classes. However, the payoffs of such individualistic human investment policies will depend crucially on how supportive the rest of the neighborhood’s dimensions are for providing a launching pad for opportunity. In the past we have been discouraged that most such piecemeal attempts at encouraging human investment have done little to change youths’ behaviors (i.e., moved them little along the opportunity continuum). But that is because these attempts have been conducted in neighborhood contexts that are largely ineffective as launching pads, and attempts to comprehensively alter the effectiveness of the neighborhood have been few.
So how do we change the situation so that more people are undertaking human capital investment behaviors in the context of a more effective neighborhood launching pad? There are three possible strategies that relate to the residential location of individuals. The employment and income prospects of individuals can be improved if changes occur that reduce the disadvantages those neighborhoods now impose on the opportunity structure of their residents; if individuals are able to move out of poor city neighborhoods; or if the link between residential location and opportunity structure is broken (e.g., through a school voucher program). These strategies are not mutually exclusive; they can be pursued simultaneously.
The first strategy implies a broad array of "community development"-like activities (though specifically designed to encourage opportunity enhancing behaviors by its residents, not to build edifices). This means that some policies may be appropriate at the local, neighborhood level of geography (building neighborhood social networks, improving neighborhood schools or child care facilities, neighborhood watch or local crime control strategies, stay in school and anti-teen age pregnancy programs); others at the municipal jurisdictional and the regional levels (improved performance of the school system, interjurisdictional redistribution of resources to permit better services related to human capital development etc.). The second strategy employs policies to expand the spatial choice set of households who now typically have the least choices: low-income and minority households (subsidized housing for low and moderate income households in the suburbs, more effective enforcement of housing discrimination laws, changes in suburban zoning regulations that effectively preclude low-income residents). The third implies the existence of choice and mobility programs while people continue to reside in existing neighborhoods (e.g., school voucher plans, child care and development programs at the workplace, improved transportation to jobs in the suburbs etc.)
Clearly, spatial considerations and human capital development are not the only possible or desirable targets for public policy intervention to increase the employment and lifetime earnings of poor central city residents. Policies to increase the regional demand for labor for those poor central city residents at points A and B on the opportunity continuum (regional economic development, public or community service employment, enforcement of anti-discrimination in employment laws) may also be important and appropriate. Similarly policies that address institutional imperfections (lack of effective job information networks for central city poor, lack of effective local labor market intermediary organizations linking central city poor to employers with jobs, inadequate transportation from the city to suburban job opportunities) may also be called for.