How to End the Nightmare of Jobless America
Over the last six months, reports of the faltering U.S. jobs market have inundated the media. Last Friday's bleak numbers showed unemployment ticking up a tenth of a point, from 8.1 percent to 8.2 percent. But largely absent from the discussion are the American cities where the jobs crisis is nothing new -- areas that have been experiencing an ongoing unemployment nightmare since well before the financial crash.
We can call them America’s "dead zones" —metropolitan and micropolitan areas where the unemployment rate has been at least 2 percentage points higher than the national average for five, 10 or 20 years.
Conventional wisdom assumes that economically distressed areas exist only in inner-city slums or rural backwaters. But dead zones, although plagued by persistent high unemployment, rarely fit those stereotypes. Rather, they come in all shapes and sizes; these cities are not necessarily crime-ridden or poverty-stricken. In fact, many dead zones have median incomes at or even above the national average. Instead, they share sustained, and in many cases are begrudgingly resigned to, high unemployment rates regardless of the national business cycle.
In general, between 25-35 percent of their residents’ incomes are provided by government aid, compared to 17 percent nationwide. Between 25-40 percent live on $30,000 a year or less. The workforce in most dead zones has a low education level, with more than 50 percent possessing just a high-school degree or less. Most jobs in dead zones are in low-end service industries, especially retail. Such jobs offer few prospects for upward mobility or skill enhancement.
A few dead zones are on the right track, while others are clearly headed down the wrong track. Shining a spotlight on five specific cases gives us clues to the scope of the predicament, and also potential solutions. We'll compare Henderson, North Carolina; Seneca, South Carolina; and Kokomo, Indiana with dead zones that seem doomed to further stagnation – Hanford, California and Natchez, Mississippi.
Inside Jobless America
1. Henderson, North Carolina
For more than 20 years, Henderson, population 43,000, has watched jobs vanish. The tobacco, cotton and textile industries once made it a thriving community, but for the last few decades the city’s main industries have been in distributional warehousing, low-end manufacturing and retail trade. Henderson’s median income has plunged by 9 percent over the past decade to stand at $45,000, the national average. Because of its poorly educated work force, Henderson sends few workers to nearby higher-education institutions like the University of North Carolina and Duke, or to Research Triangle Park, the high-tech hub located between Chapel Hill, Durham and Raleigh.
2. Natchez, Mississippi
Natchez has a lot in common with Henderson. Hugging the border with Louisiana along the Mississippi River, it was once a center for cotton, trade and textiles. Old South wealth settled in the area, and even today more than 200 antebellum structures remain standing. But today's Natchez has experienced high joblessness levels for 20 years. The 49,000 residents have a median income of $29,000, which is 11 percent less than a decade ago. In 2003, the already struggling city suffered a major loss when three companies shut down: International Paper Plant, Armstrong Tire and Johns Manville, a construction-supplies producer. Natchez now promotes itself as a retirement community and relies mainly on tourism, medical and retail industries, as well as a local casino and prisons.
3. Hanford, California
With 148,000 permanent residents, Hanford has had high unemployment for over two decades. The city’s median income is right at the national average, about the same as it was 10 years ago. Here, the primary employers are prisons, seasonal agriculture, the Lemoore Naval Base, a small Indian casino (located about 10 miles away), and two large firms: Del Monte (a canning plant) and Marquez Brothers (a cheese producer). As with other dead zones in the Southwest, Hanford’s economy depends on migrant workers. One area of strength is that Hanford provides the only major shopping center within 40 miles. Here again, however, low-paying retail work is the norm, with few opportunities for upward mobility.
4. Seneca, South Carolina
This very rural community of 71,000 residents has seen high levels of unemployment over the last decade. Its median household income is $41,000, down 13 percent from 10 years ago. Similar to Natchez and Henderson, Seneca was originally a textile town. Here, the influence of the textile industry was considerable—residents relied on the mills for everything from running schools to maintaining stores. The construction of Hartwell Dam in 1962 created two artificial lakes, which have made the area a self-described haven for retirees and recreational tourism. These lakes also led to the construction of the Oconee Nuclear Station in 1974. Small to midsize factories producing automotive and industrial parts comprise the rest of the local economy.
5. Kokomo, Indiana
The 98,000 people who live in Kokomo have historically relied on the automotive industry to provide good jobs. Chrysler operated four plants, and several suppliers of auto parts and materials also had factories in the area. For many years, young people who graduated high school could look forward to jobs at these local plants. So they had little incentive to pursue higher education, even though the city boasts four universities (Indiana University Kokomo, Purdue School of Technology, Indiana Wesleyan University, and Ivy Tech Community College). Though Kokomo’s median income is right around the national average, it is down 16 percent from a decade earlier. The city’s workforce was hit hard by the recession of 2008 and the subsequent Chrysler plant closings. Over the last five-plus years, unemployment has climbed steadily.
These cities illustrate the economic diversity of the over 200 dead zones in the U.S. But they also suggest that distressed areas have more similarities than differences. For example, many dead zones present themselves as destinations for tourists and retirees, and like Natchez, hope to create an image of this sector as a “renewable industry.” But tourism remains extremely sensitive to changes in tastes and macroeconomic conditions (as is the case in Las Vegas, where high unemployment has recently become the norm). It also tends to create low-skilled service jobs that offer almost no prospect for upward mobility.
Dead zones are often home to military bases, casinos and prisons—industries that demand very little skilled labor, and like retail and government work, offer few opportunities for workforce advancement and job growth. The single industry commonly found in dead zones that provides opportunities for advancement is medical services. But even here, the jobs in greatest demand tend to be in lower-paying occupations.
The overwhelming majority of dead zones have been economically distressed for decades. But in the cases of Henderson, Kokomo and Seneca, they have started to work with economic development organizations on programs that focus on improving local job prospects.
What Goes Right
Henderson, for example, created Triangle Park North in 2005 with three surrounding counties. This initiative includes sharing the costs of developing and marketing industrial parks in each of the counties. The hope is to provide manufacturing services for the nearby Research Triangle. The effort has begun to pay off, as a solar-panel manufacturer and an EMS-vehicle firm have recently announced plans to move to the area.
Dead zones differ in their approach to education and workforce training. In Kokomo, the days of 24-hour production and 15,000-plant workers are gone. A new business model has emerged that focuses on encouraging advanced, specialized manufacturers to relocate to the area. To that end, the Greater Kokomo Economic Development Alliance started working with local colleges and technical schools to retrain workers. This initiative has led to record enrollments, supporting the area’s education industry while simultaneously creating a more skilled workforce.
Seneca faces a very different challenge: a general lack of infrastructure. Here the Oconee County Economic Development Group has tried to attract businesses by highlighting its strengths: a stable local workforce and very low costs. In addition, a program was started that reaches out to students as early as eighth grade to begin career planning. Older workers who have recently lost their jobs are also attending classes at the local community college and enrolling in retraining programs in new fields.
Rodney Hollingsworth was laid off after more than 30 years of working in the construction industry in the Seneca area. With construction jobs scare, he decided to return to school and applied to the Goodwill and Tri-County certified nurse aide (CNA) program. After completing 92 hours of training plus an additional CPR class, and passing the CNA state certification exam, he was offered an interview for a part-time job by the head nurse at Clemson Downs Retirement Center. Having already cared for both his father and mother-in-law, who had recently succumbed to cancer, he knew this was the career path for him. Within three months, he was working full-time.
Rodney’s story is an example of local businesses and non-profits partnering up to tailor educational programs for specific needs. In Seneca, the plant manager for auto-parts manufacturer BorgWarner has been working with the superintendent of public schools as well as the directors of the local technical colleges to design programs that will enhance students’ employment prospects in advanced manufacturing. In fact, Seneca was recently honored at South Carolina's 20th Annual Industry Appreciation Week for its business-government partnerships.
In Kokomo, Chrysler recently announced a $1 billion investment plan to make the city the center for manufacturing certain car parts. The city has partnered with local colleges and even high-school career centers to ensure a steady supply of qualified electrical engineers and other technical workers.
In Henderson, when a new company moves to the area, the Henderson-Vance County Economic Development Commission schedules a meeting with representatives from local community colleges to determine what programs might be needed to support the enterprise. At Vance Granville Community College, administrators work on instituting and implementing customizable training services for the company’s workforce; they also created a new five-year program in which students can earn a high-school degree and an associate degree simultaneously. As a result, high school drop-out rates have fallen and new bio-tech labs have been established.
Business-government partnerships are only one part of what needs to be done to reduce the staggering number of dead zones. In Kokomo, even with a new business model, the economy remains heavily dependent on automotive manufacturing, so city leaders are now focusing on diversifying production to other industries; recently they have attracted a cabinet-making firm from Kansas.
Moreover, the city has created a commercial incubator, Inventrek, to nurture small businesses. After the automotive-electronics firm Delphi laid off 300 of its lowest-skilled engineers in Kokomo in 2008, the Economic Development Alliance partnered with a venture-capital firm, Purdue and Indiana Universities, Inventrek and the local community to create an engineering contract company, Neupath, which farms these workers out to different projects. Funded in part by a WIRED (Workforce Innovation in Regional Economic Development) grant from the U.S. Department of Labor, this new company enables qualified and experienced engineers to continue working in their fields without having to relocate. Not only does Neupath provide work for recently laid-off laborers, it also serves as a database for future employers looking to hire full-time. Kokomo’s mayor, Greg Goodnight, recently said, "Private-public partnerships are what move this community forward."
What Goes Wrong
Unfortunately, Henderson, Kokomo and Seneca are the exception rather than the rule among dead zones. Too many places, from Atlantic City to Branson, Missouri rely heavily on tourism as their major industry. Some places, like Hanford, still have not put in place a proactive economic-development program. Too many others have weak or nonexistent chambers of commerce (they mostly serve as directories for local businesses) and political leaders who lack the wherewithal to develop and promote programs to reduce unemployment. Other cities, such as Natchez, lack developmental resources—their local economic-development group, Natchez Inc., has only three staff members, all hired in 2010. They have had some success, attracting businesses like Elevance Renewable Sciences and InterSteel, but they have failed to put in place a comprehensive vision for Natchez’s future. They are now trying to promote industries as varied as tourism, forestry and chemical manufacturing.
Developmental initiatives take time to plan, implement and realize results. It is unlikely that outside resources—particularly from the federal government—will be available to boost employment in the near future. As evidenced by Kokomo and Seneca, economic-development programs can have a major impact. Both areas have seen significant reductions in unemployment since 2009 when they implemented such programs: from 14.7 percent to 9.9 percent in 2011 in Kokomo, and from 13.4 percent to 10.2 percent over the same time period in Seneca. Natchez and Henderson, on the other hand, have had proactive initiatives in place for a year and have not yet seen significant changes. Hanford, where the jobless rate sits at 16 percent, clearly shows that when no initiatives are taken, unemployment will remain high.
All dead zones, however, still face large obstacles. In Kokomo’s case, nothing could have prepared it for the mass layoffs of 2008-'09, nor could anything have saved it short of a full-fledged government bailout of Chrysler. But WIRED grants, plus local commitments, can make a difference. It remains the case, however, that state and federal aid is often both too slow and too scattered, minimizing its impact. Thus the onus for action falls to the local level, precisely where the fewest resources are available. Initiatives such as the workforce-retraining programs in Seneca and Henderson provide one potential model. Proactive business-government partnerships, education and training programs geared to specific labor force needs, and diversifying local economies hold the key to an America free of dead zones.