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Insight | TIMES BOARD OF ADVISORS

Growth Strategies Must Include the Poor

December 08, 1996|MANUEL PASTOR Jr.

After years of lagging behind the national economy, the Los Angeles area's economy seems to finally be climbing out of both a sharp recession and the pains of industrial restructuring. Last year saw a small improvement in employment figures and 1996 will bring further growth. Aerospace has finally bottomed out and is poised for a modest comeback, partially fueled by the recent decision to build a space shuttle prototype at Lockheed Martin's "Skunk Works" in Palmdale.

The federal government has promised $400 million in loans to help build a high-speed rail line in the Alameda Corridor, a project sure to prompt new employment at our ports and warehouses. The development of DreamWorks, the first new movie studio to be built in more than 50 years in Los Angeles, promises to be a linchpin in the rapid expansion of our multimedia and entertainment industries. Even tourism--an industry weakened by the specter of civil unrest, earthquakes and crime--is on the upswing.

With regional output gains now likely to exceed national rates, policymakers may be seduced into resting on their laurels. But the news is not all positive: Unemployment is hovering at a stubborn 2 to 3 percentage points above the national average, the county government is likely to continue the layoffs of the last few years, and the pockets of poverty that prompted the social explosion of 1992 persist.

Should we be worried? Won't the rising tide of regional growth lift the boats of the poor and create opportunity for all?

The answer to the first question is yes, to the second, no. The rapid expansion of the 1980s in Southern California was actually accompanied by an increase in the poverty rate that outpaced the national rise in poverty over that period; moreover, the divergent experience of neighborhoods and population subgroups resulted in a "widening divide" by class and race. In the absence of conscious policies to link poorer communities and individuals to the poles of regional expansion, the current recovery is likely to simply be a rerun of the uneven and noninclusive performance of the previous decade.

The lack of policy attention to the poor is not surprising. After the civil unrest of 1992, low-income communities enjoyed what Andy Warhol once described as 15 minutes of fame: Rebuild L.A. (subsequently christened RLA) was formed to promote economic development in "neglected" areas; the federal government passed legislation to create empowerment zones (which L.A. eventually failed to secure); and many of Los Angeles' community development corporations came together under a new umbrella organization, the Coalition of Neighborhood Developers, to pursue their joint interests at the policy level.

But just as these hopeful efforts were getting started, the enormousness of the difficulties in the regional economy became apparent and policymakers quickly reset their sights to the loftier level of regional policies.

As the current recovery demonstrates, some of this re-shifting of attention has been both necessary and productive. But the poor cannot long be forgotten, not only for the usual normative reasons but also because their participation is key to a full-fledged and balanced recovery.

A recent spate of research from the National League of Cities and the Federal Reserve Bank of Philadelphia has suggested a significant correlation of suburban and central-city income growth. The explanation given is that suburbs are not truly disconnected from the cities that anchor their region, and suburbanites will only prosper when inner-city problems are not neglected.

Unfortunately, some of this research is plagued by methodological problems: It could be that an outside factor is raising incomes in both city and suburb, and even if there is no outside factor, it remains unclear whether cities drive the suburban economic engine or the other way around.

As part of a project funded by the Haynes Foundation Solutions Research Program, a group of colleagues from Occidental College and UCLA and I decided to redo the previous work, focusing on the linkage between central-city poverty and regional income in 62 large metro regions for which we could collect all the relevant data.

Including other factors that may affect regional growth and controlling for the fact that growth itself lowers central-city poverty (by tightening labor markets and hence raising wages and employment), we found that those regions that are able to successfully reduce central-city poverty also tend to grow faster.

The reasons are straightforward: Regional growth strategies require consensus, and such consensus is not easily forged in the face of inequality and persistent poverty. Working to include the poor is both good social policy and good business.

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