Fed Economist Outlines Trends in Neighborhood Unemployment

In metropolitan areas across the country, the overall unemployment rate between 1980 and 2000 dropped. However, the number of unemployed workers residing in urban neighborhoods rose from 7.5 percent to 7.9 percent. This concentration of unemployed workers in certain neighborhoods may account for two trends over the last three decades: rising inequality in both income and earnings and an increase in the expected duration of unemployment.

Those are among the findings of a new study by Fed research economist Christopher H. Wheeler: The Rising Residential Concentration of Joblessness in Urban America, 1980 to 2000. Wheeler presented his study to the public July 24 in St. Louis. A panel discussion followed, featuring Blair Forlaw, director of Workforce StLouis2.0, and Nancy Box, senior director of employment services for St. Patrick Center in St. Louis.

Wheeler’s study looked at neighborhood-level unemployment in more than 360 U.S. cities, including four within the Eighth Federal Reserve District—Little Rock, Louisville, Memphis and St. Louis. All four District cities saw increases in unemployment concentration between 1980 and 2000, although the rise was not as pronounced in Louisville as in the other three.

What’s behind this trend? Among several plausible explanations, the study found greatest support for the idea that an increased segregation of households by income and educational attainment is the underlying factor. A person’s ability to find a job may be affected by the extent of joblessness in his or her neighborhood. If an unemployed worker’s neighbors are also out of work, the chances of finding a job through a contact decrease. And employers may avoid hiring workers from high unemployment neighborhoods, due to social stigma.

For these reasons, the study suggests policymakers should give serious consideration to the notion that the residential concentration of unemployed workers represents a significant aspect of the unemployment problem in the United States.

After Wheeler’s presentation, the panelists discussed workforce development in general and in the St. Louis area. Forlaw praised Wheeler for his work and the Fed for scheduling the presentation for community groups. “It’s when research and community come together that we can begin to see quantifiable results,” she said.

Forlaw emphasized three points:

1. Improving the employment rates is only a starting point. The overall solution is to create economic stability and wealth, work that is sustainable, careers that lead to continuous opportunities and assets that provide a buffer against difficult times and a head start for future generations.
2. Barriers to urban-core job seekers accessing suburban employment include a lack of transportation, lengthy commutes, wage considerations, the need for extended-hour child care, anxiety about being far away from home if an emergency arises and more.
3. Neighborhood segregation by income and education is problematic. In communities where almost everyone has very low incomes, for example, the flame of hope for a better future is at risk of burning out—and hope is a vitally important factor in the transition from joblessness to economic stability. Regions that are segregated and do not value the rich diversity of the global economy do not attract the bright young people needed to compete in the new economy marketplace.
   

Box gave an overview of some of the employment programs offered at St. Patrick Center, a nonprofit organization helping homeless people and those at risk of becoming homeless. About 4,000 people are enrolled in St. Patrick Center's employment programs each year. About 1,000 complete the program and find employment, making an average of $8.61 per hour.

She said Wheeler’s conclusion that residents living in neighborhoods with high unemployment have a difficult time finding jobs dovetails with what St. Patrick’s has seen in communities. Box cited a survey of the largest businesses in St. Louis that showed 65 percent of new-hires at those companies got their jobs through referrals. In neighborhoods where many residents are unemployed, it is more difficult for a person to find someone who might know about job openings, she said.

Other challenges that Box mentioned were placing those with felony convictions in jobs, the lack of transportation to jobs and employers who avoid hiring people who live in distressed neighborhoods.

Box presented statistics supporting findings in Wheeler’s study:

• Of the overall population served (9,000 per year) at the center, 44 percent completed high school. Only 6 percent have a college degree or better.
• Of the 4,000 clients in employment programs, 46 percent have a high school diploma, and 7 percent have a college degree or better.
• About 50 percent of St. Patrick's clients have been incarcerated at some point in their lifetime, many more than once.
• The average client at St. Patrick Center is a 37-year-old black male, no high school diploma, sporadic entry-level work history, no transportation and a conviction.

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