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6 Investing in the
Future of the Urban
Labor Force
NEW JOBS, MORE JOBS, DIFFERENT JOBS
IN DIFFERENT PLACES
A substantial investment in human resources will be required if the
nation is to take advantage of the opportunities offered by the structural
changes that are transforming the economy and the urban system and by
the growth in demand for occupations that require information, commu-
nications, and interpersonal skills. As the mechanization of work in both
manufacturing and services continues and accelerates, all types of urban
areas, including those with strong service sectors, will need resilient labor
forces if they are to take new economic roles. While the importation of
labor for the new jobs and the out-migration of workers who lose "old"
jobs are always possibilities, the slower national rate of growth for tra-
ditional manufacturing means that the redundant blue-collar workers will
not have the same opportunities for migration that once were common-
place.
The recent recession has had a powerful reinforcing effect on structural
change. It has accelerated the decline of the weaker industries and those
most vulnerable to international competition. When the upswing of the
business cycle occurs, there will be greater growth in the newer industries
and occupations particularly those offering new products and services-
relative to expansion in the older industries and occupations (Bureau of
Industrial Economics, 19821. Many of the jobs that have disappeared
97
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98
Rethinking Urban Policy
during the recession, particularly in manufacturing, mining, and distrib-
utive services, will not reappear when it is over. The new jobs that are
created will be predominantly in service occupations. And in manufac-
turing, the number and proportion of service jobs will increase, although
the absolute number as well as the proportion of traditional production
jobs could decline. Many service enterprises, particularly those based on
office work, will increase their level of mechanization (Ginzberg, 19821.
There will be new jobs, perhaps more jobs, but they will be different,
many of them demanding new skills and higher levels of education and
training. Many workers will have to acquire new skills continuously to
retain their jobs. Unskilled jobs are likely to pay less in relation to other
work than similar jobs in the past. Many of the new jobs will not be
located in the same places as the old jobs. They will be in different parts
of the metropolitan area and distributed in a different pattern throughout
the country.
Table 7 shows growth rates for selected industries during the last decade
and projections to 1990. Because the figures for 1990 are based on past
trends, they probably overstate growth in traditional manufacturing and
understate growth in electronic technology and services. Major changes
in such basic industries as metals and automobiles suggest that there is
likely to be more permanent displacement of workers in these industries
than is projected, even in an economy that is on the whole resurgent.2
The Geography of Cyclical and Structural Unemployment
The geography of the recession is an important factor in restructuring
urban economies. Because of the regional concentration of particular in-
dustries, the recession has had uneven consequences for local economies.
In September 1982, when the nationwide unemployment rate reached 10.1
percent, it was over 20 percent for workers in the steel industry and other
primary metals and over 15 percent in the automobile, textile, and lumber
industries. No service industry had experienced unemployment rates of
over 14 percent, and the rates in communications; finance, insurance, and
real estate services; and government were all under 5 percent (New York
Times, October 10, 1982:A11. In fact, while employment in all goods-
producing industries declined by 5.8 percent between July 1981 and April
~ There is some evidence that technological advances could destroy more jobs than they create
(Schwartz, in press). This view is disputed by Levitan and Johnson (1982).
2 From 1979 to 1982, employment in traditional manufacturing industries fell by 11 percent
(650,000 jobs) (Congressional Budget Office, 1 982a:8).
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Investing in the Future of the Urban Labor Force
TABLE 7 Percentage Distribution of Actual and Projected Annual
Growth Rates for Employment in Selected Industries
1979- 1990
99
High Low
Sectors and Industries 1969-1979 Trend Trend
Traditional manufacturing
Motor vehicles 0.9 0.5 - 0.7
Textiles - 1.2 0.6 0.2
Rubbera 0.3 0.6 0.5
Iron and steelb —0.7 0.8 0.6
Energy-related
Crude petroleum and natural gas
extraction 3.0 4.0 3.6
Coal mining 6.7 5.4 4.1
Construction, mining, and
oil field machinery 3.4 4.8 2.4
Electronic technology
Computers and peripheral equipment 4.6 5.2 4.2
Electronic components 2.9 2.2 2.2
Services
Miscellaneous business services 6.4 3.8 2.9
Health servicesC 5.2 4.8 4.1
Professional services 5.1 3.1 2.2
Finance, insurance, and real estate 3.6 2.8 2.2
Total employment 1.9 2.1 1.4
NOTE: The projected low trend assumes a decline in the expansion rate of the labor force,
continued high inflation, moderate gains in productivity, and modest increases in real output
and employment. The high trend assumes a larger labor force, higher production and productivity,
and lower unemployment rates.
aIncludes tires, inner tubes, and miscellaneous rubber and plastics products industries.
bIncludes blast furnaces, basic iron and steel, and steel foundries and forgings industries.
CIncludes doctors' and dentists' services, hospitals, and other health-service industries.
SOURCE: Congressional Budget Office (1982a).
1982, service employment actually rose slightly, by 0.3 percent (New
York Times, May 18, 1982:D11.
Tables 8 and 9 illustrate how these extreme variations in sectoral un-
employment have affected particular urban areas. Most of the 20 SMSAs
in which unemployment exceeded 12 percent contained high concentra-
tions of the industries in the lagging sectors (Table 81. Of these 20 SMSAs,
8 are classified as manufacturing centers in the urban system. Only 3 are
regional (diversified service) centers: Mobile, Birmingham, and Spokane.
Of the four functional (specialized service) centers, Detroit and Peoria are
centers of the automotive and heavy equipment industries.
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Representative terms from entire chapter:
labor market
100
Rethinking Urban Policy
TABLE 8 Metropolitan Areas With the Highest Unemployment Rates,
July 1982
Unemployment
SMSA Rate Classification
Rockford 1 9.1 Manufacturing
Flint 18.6 Manufacturing
Youngstown 18.3 Manufacturing
Peoria 15.9 Functional
Gary 15.6 Manufacturing
Lakeland 15.4 Mining-Industrial
Northeast Pennsylvania 15.1 Manufacturing
Johnstown 15.1 Mining-Industr~al
Duluth 14.7 Mining-Industr~al
Detroit 14.4 Functional
Mobile 13.6 Subregional
Jersey City 13.3 Functional
Canton 13.1 Manufacturing
Birmingham 13.0 Subregional
Huntsville 12.8 Industrial-Military
Tacoma 12.8 Educational-Manufacturing
Spokane 12.4 Subregional
Fresno 12.2 Government-Education
Knoxville 12.1 Functional
Chattanooga 1 2.1 Manufacturing
York 12.0 Manufacturing
U.S. average 9.8
SOURCE: Bureau of Labor Statistics ( 1 982:Table D- 1).
The effect of cyclical factors on different types of cities is further
illustrated by Table 9. Of the 22 SMSAs with rates of unemployment well
below the national average (9.8 percent) only l, Lancaster, is a manu-
facturing center. The 3 functional (specialized service) centers, Tulsa,
Hartford, and Rochester, are centers for energy, insurance (a major service
industry), and advanced instruments, respectively.
Even with the end of the recession, many cities where declining in-
dustries are concentrated will continue to face long-term structural un-
employment. Even in areas in which a major restructuring of the economy
is well advanced, as in New York City, the introduction of new service
jobs does not mean that those who have been laid off from the disappearing
manufacturing jobs will find work. Workers for many of the new jobs
will be imported from other regions. Skilled and semiskilled workers in
areas with concentrations of old-line industries will, in many cases, transfer
to consumer service occupations, usually at lower pay and with fewer
benefits (
Investing in the Future of the Urban Labor Force
TABLE 9 Metropolitan Areas With the Lowest Unemployment Rates,
July 1982
101
Unemployment
SMSA Rate Classification
Raleigh-Durham 4.4 Government-Education
Oklahoma City 4.5 Subregional
Harrisburg 5.5 Government-Education
Lancaster 5.5 Manufacturing
Washington 6.3 Government-Education
Minneapolis 6.3 Regional
Tulsa 6.3 Functional
Denver 6.3 Regional
Nassau 6.3 Residential
Orlando 6.4 Resort-Retirement
Hartford 6.4 Functional
Ft. Lauderdale 6.5 Resort-Retirement
Newport News 6.6 Industrial-Military
Atlanta 6.6 Regional
Philadelphia 6.8 Regional
Madison 6.8 Government-Education
Albany 6.9 Government-Education
Pensacola 6.9 Industrial-Military
Anaheim 7.0 Residential
Rochester 7.0 Functional
U.S. average 9.8
SOURCE: Bureau of Labor Statistics (1982:Table D-1).
Some workers whose jobs have been terminated will seek to move to
areas where they think their skills may be marketable. If those skills are
limited to industries or occupations that are declining, relocation is likely
to change only the site of their unemployment or underemployment. The
American economy may have reached the end of an era in which there
was always a good job somewhere for a skilled blue-collar craftsman.
Clearly, however, new skills in a wide range of occupations are needed.
For example, projections estimate that while demand for machine assem-
blers will increase only 27 percent by 1990, demand for data processing
machine mechanics will increase by over 157 percent (Carey, 19811.
Redundant Labor
Estimates of the size of the structural unemployment problem (Table
10) suggest that as of January 1983, depending on the definition used,
the number of dislocated workers could vary from 100,000 1 percent
of the unemployed to over 2 million—about 20 percent of the unem-
102
Rethinking Urban Policy
played (Congressional Budget Office, 1982a). Probably a practical esti-
mate for policy-making purposes is 800,000-1,000,000, accounting for
most of the workers affected by mass layoffs and plant closings (Congres-
sional Budget Of fire, 1 982a:4 11.
-These estimates describe only the immediate problem. They do not
account for continuing worker dislocation from further changes in the
economy and within specific industries over the next decade or so.
The problem of redundant labor differs from the problems of temporary
unemployment that the nation has faced in the past. First, it is a continuing
problem and will exist in periods of prosperity (although it will not be as
severe) as well as in periods of economic recession. Second, structural
change compounds the impact of cyclical unemployment on skilled work-
ers and older workers. In 1982, for the first time in recent history, the
rate of unemployment in the skilled trades exceeded the average unem-
ployment rate (New York Times, August 8, 19821. Certainly this situation
was exacerbated by a prolonged recession that hit construction industries
especially hard. Many skilled workers are older. Table 10 shows that
845,000-1,050,000 workers currently affected by structural unemploy-
ment are in their mid-forties or older. Some of these workers have skills
that are unsuited to the kinds of new jobs that are being created in the
growing sectors of the economy. Thus they may have a difficult time
finding replacement jobs either in their existing communities or in places
to which they might move if their old jobs are not restored as the recession
ends.
The problem is further complicated by the large concentrations of re-
dundant manufacturing workers in middle-sized urban areas with spe-
cialized economies. Thus, structural change in a single plant can affect a
large percentage of the total local labor force. Even if it is assumed that
relocation to another area would increase chances of reemployment, the
age of such workers makes migration a difficult option to pursue. Com-
munity and family ties, mortgages on existing homes at rates that cannot
be duplicated in a new location, and supporting institutions and services
in existing communities, unions, and industries tend to inhibit migration.
The redundant labor problem in declining industries has both short- and
long-term aspects. In a number of areas there is a short-term problem of
finding jobs for those who are unemployed, whose unemployment benefits
have been exhausted, and whose prospects for being called back to their
old jobs or to work in the same firms are at best remote. They may need
retraining, relocation, or both. For the long term, there is a need to devise
methods of anticipating declining employment or occupational restruc-
turing in some industries and to institute programs to retrain and relocate
workers whose jobs will be eliminated. In the absence of such programs,
Investing in the Future of the Urban Labor Force
TABLE 10 Estimated Numbers of Dislocated Workers in January 1983
Under Alternative Criteria and Economic Assumptions
Number of Workers (in thousands)
103
Criteria
High
Trenda
Middle
Trendb
Single criteria 1,065 880 835
Declining industry 1,700
Declining industry and other 2,165 1,785 1,095
unemployed in declining areae 1,360 1,150 675
Declining occupationf 835 710 845
10 years or more of job tenure 1,050 890 535
More than 45 years of age 760 560
More than 26 weeks of unemployment
Multiple criteria
Declining industry and
10 years of job tenure 275 225 215
45 or more years of age 250 205 195
26 weeks of unemployment 145 110 100
Declining industry including
other unemployed in declining
arease and
10 years of job tenure 430 355 340
45 or more years of age 490 395 375
26 weeks of unemployment 330 255 245
Declining occupationf and
10 years of job tenure 235 195 185
45 or more years of age 335 280 265
26 weeks of unemployment 165 120 105
aHigh trend assumes continuation of March 1980-December 1982 growth rates in the number
of unemployed workers in each category. Specifically, the number of workers unemployed from
declining industries increased by 32 percent in this period a monthly average of 1.4 percent.
bThe middle trend assumes that the number of dislocated workers will remain constant from
December 1981 to January 1983. The number of dislocated workers in December 1981 is
estimated by adjusting March 1980 Current Population Survey totals for changes in the level
and composition of unemployment through December 1981.
CThe low trend assumes that the number of dislocated workers in each category decreases
proportionately with the projected change in the aggregate number of unemployed workers
between the first quarter of 1982 and the first quarter of 1983, a reduction of nearly 5 percent.
The declining industry category includes all job losers from industries with declining employment
levels from 1978 to 1980 (see Bendick and Devine, 1981).
elf a declining industry was located in an area defined as declining, all other job losers in the
area were included. Declining areas are defined as those experiencing declines in population
from 1970 to 1980 or with an unemployment rate of 8.5 percent or higher in March 1980.
fThe declining occupation category includes all job losers from occupations with declining
employment levels from 1977 to 1980.
SOURCE: Congressional Budget Office (1982a).
104 Rethinking Urban Policy
structural unemployment is likely to reach beyond the blue-collar ranks
into the middle technical and professional levels of many industries, par-
ticularly manufacturing, mining, and some services (Ernst, 1982; Gunn,
1982).
The New Worker
A serious, broad policy issue arising from the restructuring of national
and urban economies is the inadequate preparation of those who will enter
the labor force in the future. More than in the past, the international
competitiveness of the American economy will depend on the quality of
its labor force, including its flexibility in shifting to new kinds of work
and to new ways of working. The increasing knowledge required by many
old and new occupations suggests the need to invest in the education of
the present and future labor force. Higher- and middle-level occupations
will require advanced scientific and mathematical education, computer
competence, and strong verbal skills. Lower-level occupations will require
literacy, usually more advanced verbal skills, basic mechanical skills, and
some introduction to the use of computers. The information content of
many service jobs is increasing as the proportion of unskilled private sector
jobs shrinks (Mare and Winship, 19791.
Certainly one aspect of this problem involves education in science and
mathematics, especially at the secondary-school level. In particular, there
is a need for computer literacy, a basic understanding of how to use
computers, across the whole population (National Academy of Sciences-
National Academy of Engineering, 19821. The problem is, however, far
broader and more complex than the education of a new generation of
scientists and engineers. It includes the education and training of young
people, particularly disadvantaged urban minorities and the poor, for en-
trance into and advancement in the economic mainstream.3
The shift in the economy toward service jobs should signal a need for
a reorientation of the local educational system to equip more students for
entry into that market. Even in such blue-collar industries as transportation
and distribution, traditional manual jobs are being replaced by mechani-
zation and computer-assisted systems. For a wide variety of nonprofes-
sional and nontechnical office and manufacturing jobs ranging from
secretarial positions to machinists, some training in computer-assisted
work is necessary (Guiliano, 1982:148ff.; Gunn, 1982:114ff.~.
3 Less than 2 percent of the nation's scientists and engineers are black, indicating a serious
problem of underdevelopment of a potential source of talent.
investing in the Future of the Urban Labor Force
105
Because of the ways in which work is being reorganized, career ad-
vancement may require a worker to change occupations and firms more
frequently than in the past. Without better preparation, many workers will
be confined to low-level service occupations that suffer not only from low
wages but also from rapid turnover and little or no job security. An
alternative for some has been participation in the underground economy.
Both the occupational and geographic mobility of young workers are
restricted by the lack of basic skills and work habits that are needed in a
wide variety of jobs. The absence of these transferable skills makes work-
ers less marketable and inhibits full or rapid adjustment of regional and
national economies. It also often retards the introduction of new technology
that can increase productivity and even improve the work environment.
The effect tends to be magnified at the local level, particularly in highly
specialized manufacturing economies, which tend to be the smaller urban
areas.
The problems of redundant older workers and the inadequate preparation
of younger workers for the kinds of jobs and work environment that will
increasingly characterize a more service-oriented and knowledge-based
labor market make the quality of the labor force a matter for urgent national
attention. Ways are needed to improve the ease with which workers and
jobs can be matched, whether by facilitating migration to places where
the jobs are or by attracting jobs to where the workers are. Ways are also
needed to facilitate the transition of workers from one job or occupation
to another, both within firms and between firms,4 to constantly improve
the skills of those already working, and to improve and broaden education
and training for new entrants into the labor market.
LABOR MARKET POLICY OPTIONS
The National Market Approach
There are strong differences of opinion about the way labor markets
work and how policy should address their imperfections. One view tends
to rely on the "natural" operation of the economy to produce, over time,
the adjustments that will be needed in the labor forces of metropolitan
areas. This is essentially the strategy advocated by the President's Com-
mission on an Agenda for the Eighties (1980) and the President's Urban
Policy Report (U.S. Department of Housing and Urban Development,
19821. Both assume that the labor market works spatially through the
4 To some extent this will require the cooperation of unions and management in redefining jobs
and job security arrangements within industries (Piore, 1981).
106 Rethinking Urban Policy
migration of industries and workers to locations that are the most eco-
nomically advantageous to each. They also assume that these patterns of
migration are the consequences of long-term trends that are, for all prac-
tical purposes, irreversible, or at least not subject to substantial influence
by public policy. The President's commission, for example, argues that
"recognition should be made of the near immutability of the technological,
economic, social, and demographic trends that herald the emergence of
a post-industrial society" (p. 1001. In a similar vein, the 1982 President's
commission asserts that "the variety of urban conditions is ultimately
traceable to natural geographic features and to decisions and preferences
of individuals and firms as they respond to innovations in technology,
transportation, and communications, and to changing life-style prefer-
ences" (pp. 2-30~.
Both reports assume that no form of government intervention will result
in as efficient an allocation of labor to jobs as the unfettered operation of
the market (U.S. Department of Housing and Urban Development, 1982:2-
161. They also assume that allowing the market free rein will maximize
national wealth, which ultimately will result in a higher degree of indi-
vidual and urban welfare than any strategy that attempts to redistribute
wealth among people or areas on principles of equity (President's Com-
mission on an Agenda for the Eighties, 1980:Chapter 51. This approach
relies on the idea that, in the long run, market operation will produce a
state of equilibrium in terms of both economic sectors and geographical
regions. Finally, they assume that in reaching equilibrium, the various
market prices whether for products or factors such as land, capital, and
labor- will reflect all social as well as private costs.
The Local Market Approach
Appealing as national market theory is, we feel it overlooks some
important aspects of labor market operation and is therefore not a fully
satisfactory basis for policy. First, the labor market is not a completely
integrated national market but a series of related, but also segmented,
urban labor markets (Berry, 19641. There is not one market but many,
and they are not equally competitive; they are sometimes referred to as a
dual labor market. Workers in one market may have highly imperfect
information about other markets and only approximate knowledge of their
own.
Second, one of the most basic assumptions of simplistic approaches to
free market strategy that the forces governing labor mobility are virtually
immutable appears erroneous. There seem to be few immutable forces
governing geographic patterns of labor mobility. The decline of a particular
Investing in the Future of the Urban Labor Force
107
region and the growth of another are not inevitable, nor are these occur-
rences necessarily reciprocals of each other. A short time ago the Frostbelt
metropolitan areas were scenes of rapid urban growth, presumably at the
expense of the less urbanized South. More recently, many perceived the
reverse to be the case as the southern and western states experienced rapid
job and population growth. Yet there has been a remarkable revitalization
of the New England economy, and although the Midwest has experienced
job declines, a continuation of such trends does not appear to be inevitable.
A recent study by the staff of the Joint Economic Committee, for instance,
found that the Midwest was the region expected to receive the largest
percentage increase in new plants and permanent offices of high-tech-
nology firms (U.S. Congress, Joint Economic Committee, 19821.
Empirical studies of labor markets demonstrate that the most important
single factor in labor migration for rapidly growing and rapidly declining
areas is the growth or decline of jobs. The location of investment is the
critical driving force of regional growth as well as regional differentiation
(G. Clark, 19831. Employment opportunity, or at least the perception of
opportunity, is a critical factor in urban growth. The flexibility of the
local labor market may also be an important factor because the turnover
in jobs may increase the number of chances a worker has of being hired
or moving up the career ladder in a particular local market. Turnover also
seems to explain continued in-migration of workers to declining areas (G.
Clark, 1983:Chapter 31.
National migration trends seem to be second in importance and to
respond to the growth in job opportunities. Thus general background
conditions influence the flows of workers between local labor markets.
The important consideration seems to be how well the national economy
is doing compared with the local economy (G. Clark, 1983:Chapter 31.
In times of general unemployment and slow economic growth, labor mi-
gration slows. The national trends operate to encourage migration when
workers perceive not only that their local economy is stagnant or in decline
but also that this condition is sharply at variance with other local economies
(G. Clark, 1983:Chapter 31. They are willing to take the risk that moving
entails when they see their local economy as weak in comparison with
the nation's economy and other local economies. When they see things
as bad all over, however, they are more likely to stay put.
Third, any interpretation of the operation of local labor markets must
be especially cautious in using net migration figures. Such data often
obscure more than they explain. The gross flows of workers into and out
of an urban area or region provide a far more accurate and useful picture
of what is actually happening (G. Clark, 1982a, 1983:Chapter 3; National
Research Council, 1982a). Even declining areas continue to have a steady
124
Rethinking Urban Policy
supplement that of the system. The education might include tutoring in
basic subjects, such as mathematics, or various kinds of vocational train-
ing.~6 Finally, consideration might be given to creating a few selected
residential or specialized schools offering advanced high school programs
as a means of developing the potential of exceptional young people when
the regular public schools cannot provide an environment that supports
their intellectual growth. North Carolina's School of Science and Math-
. .
emat~cs Is one example. Created by the state legislature, it draws students
from the entire state, reflecting the racial, sex, and income distribution
of the whole population. It has produced a high percentage of merit
scholars while serving as a seedbed for educational techniques that can
be used by the regular public schools (Dymally, 19821.
Clearly, the public schools will not be able to serve everyone. Seriously
disadvantaged young people will continue to need special programs such
as the Job Corps. Despite its relatively high cost per enrollee, the success
of that program appears to have built a bipartisan consensus in favor of
maintaining it as an important direct federal responsibility for training
disadvantaged people and placing them in jobs (Congressional Budget
Office, 1982b). Military service also remains an important source of basic
skill and job training for some young people. Additional attention; might
be given to the quality of both regular and reserve training as an integral
part of the nation's training strategy.
A great deal of experimentation is now going on in education and
training programs, much of it in response to the financial distress of school
budgets and the simultaneous public demand for improved performance
by schools. While much of this activity has been highly creative, and
room for experimentation is always desirable in education, one of the
tasks of state and local leadership is to begin to use this experience to
help organize investments in education and training in ways that contribute
to an overall strategy of urban economic adjustment and stabilization.
State involvement can be particularly crucial, because no matter how well
some communities educate their children, there still may not be enough
jobs in a particular local market. If part of the process is conceived as job
placement for the young worker, the placement program has to be inte-
grated with state, regional, and national systems. New entrants are among
the most mobile members of the labor force, and programs should rec-
ognize that it is often easier for them to move than it is for older workers.
i6 A paid tutoring program could have multiple benefits—e.g., making use of temporarily
redundant baby-boom college graduates and developing new skills among undereducated 25-
year-olds.
Investing in the Future of the Urban Labor Force
The educational system should also be seen as a critical part of the
economic development strategy of an urban area. Recent initiatives by
Massachusetts and other states to establish stronger vocational education
programs illustrate the importance that states are placing on training their
labor forces as an integral part of efforts to attract and keep industries
(Magarell, 1983~. Since industry tends to be reluctant to provide basic
skill training but has increasingly recognized the need for it, the creation
of an industry-supported fund, perhaps channeled through a community
foundation, might be an effective device for developing industry financial
support for the better preparation of young workers and for concentrating
those resources where they are most likely to be effective. In addition to
support for basic education, such a fund might assist in supporting, jointly
with public funds, a system of postsecondary training vouchers. These
vouchers could be issued to high school graduates for training or retraining
at a time of their choice, provided that they are not eligible for other
public subsidies of educational expenses, such as tax deductions or credits.
The vouchers could be used immediately after graduation for specialized
training or to offset college costs, or they could be banked with interest
for training at a later stage of a person's career when a job change was
necessary or desirable.
One way of looking at this proposal is as an extension of public re-
sponsibility for the education process by one year but not necessarily a
consecutive year on the theory that the returns to society through greater
productivity and earning power will more than repay the cost. Many self-
employed professionals are able to deduct their continuing educational
costs from their income taxes, thus shifting part of such costs to the public
at large. Ordinary workers who are less able to bear the cost, however,
have no such opportunity. For most American workers, a tax deduction
or credit would have little dollar value, whereas a voucher would allow
them to discount the out-of-pocket cost of retraining or a special course
to an affordable level. With a long-term decline in the proportion (and in
many states the absolute number) of students in regular kindergarten through
12th grade, a postsecondary voucher program would result in a less rapid
decline in the proportion of the public budget devoted to education, but
would not axiomatically increase education outlays. A supplemental source
of funding for postsecondary training might be tax credits for corporations
that provide training vouchers to their employees for use in cooperatively
funded institutes operated by an industry, a regional association of firms,
or a government-industry partnership. Like credits for research and de-
velopment, employee training provides a substantial long-term benefit for
a small, early cost.
125
126
Rethinking Urban Policy
While the proposal at this stage is conceptual, the basic idea is to
provide, much as the G.I. Bill did, a flexible opportunity for education
that fits individual need and produces a national social benefit. Postsec-
ondary vouchers could be used, for example, for regular public vocational
training, privately provided training, union programs, and, conceivably,
for self-teaching programs such as computer courseware that have been
accredited by the appropriate educational or training authorities.
Such a program would be to the advantage of industry as well as
workers, since it is increasingly obvious that all the jobs that will be
created cannot be filled by new recruitment alone. Retraining the existing
work force will be a continuing necessity for any industry that hopes to
keep abreast of new technology and remain competitive (Mills, 1981:2671.
Moreover, as an increasingly important objective of collective bargaining
agreements, labor organizations are considering the rights of employees
to retraining and to participate in judgments about the introduction of
mechanized systems (Levitan and Johnson, 19824.
Keeping the Skills and Knowledge of Workers Up to Date
We can no longer assume that a high school graduate who does not go
to college or some other postsecondary educational program will need no
further basic or special training apart from that received on the job. Success
in the labor markets of an advanced economy will increasingly entail
continuous education as part of a worker's life. It is conceivable that in
the l990s some urban school systems will enroll more adults than children.
This suggests a restructuring of urban education, with more attention to
adult and continuing educational programs, to adult vocational education,
and to expanding the role of community colleges. It also suggests changes
in the basic social contract involving labor, industry, government, and
educational institutions.
Redundancy planning should become a normal function of industries
and communities.~7 Essentially, redundancy planning means anticipating
changes in the economy, markets, and technology and the ways they will
affect patterns of employment in the industries located in a community.
Such a program would attempt to identify those industries and firms
that can be expected to experience substantial changes in their labor re-
quirements as a result of shifts in markets or technology, giving emphasis
to urban areas in which there are heavy concentrations of such firms. By
|7 Our discussion of redundancy planning is based on Drucker (1981:249-251); also see Oreskes
(1982:5)
Investing in the Future of the Urban Labor Force 127
anticipating and preparing for transitions, it may be possible to smooth
the process for firms, workers, and their communities. Firms that operate
in changing markets are often under great pressure from their unions and
local communities to maintain practices that may even speed their demise.
Workers are understandably anxious about the prospect of losing a job
when they have skills but no known prospects of continued employment
in their trade and no sense that they may have skills that are transferable
to other jobs in the same firm, in another firm in the same community,
or to another firm in another community.
Redundancy planning also means having preventive unemployment pro-
grams available for retraining the dislocated workers and a process set up
to place them in new jobs. If established, such a process can ease the
transition considerably. Workers can be offered training and new jobs
before their present jobs are terminated.
A preventive strategy essentially consists of foreseeing the decline of
employment in an industry and preparing workers through retraining pro-
grams for other types of jobs, preferably new jobs in the same labor
market. Such a program has been used, with some reports of success, in
West Gerrnany(NationalResearch Council, 1982b:19;Wolman, 1982:1131.
Where industries are unionized, contract clauses providing for early warn-
ings of permanent layoffs and for job training may become fairly standard,
reflecting both a growing sense of corporate responsibility for the welfare
of employees and union realization that their members' interests can be
protected best if they are assured of gaining and maintaining marketable
skills. In many cases this assurance may consist of training in the general
verbal and quantitative skills needed to operate computerized equipment
or to compete for the better jobs in service industries.
While it is reasonable to assume that industries will increasingly accept
responsibility for retraining workers who face layoffs, communities should
also become involved in redundancy planning. Because many workers
would probably prefer not to relocate and because substantial relocation
of workers can have a serious ripple effect on the local economy and fiscal
capacity, the community should also assume some part of the obligation
for redundancy planning and for helping to train and place as many workers
as possible in new jobs in the community or within commuting distance.
From the perspective of industry, if no redundancy planning or retraining
programs exist, decisions to change corporate investment patterns or to
introduce new technology will be resisted more strenuously by both work-
ers and their community leaders.
Redundancy planning should be aimed primarily at workers who have
several years of experience but who are well under retirement age. They
are the most vulnerable because they have families to support, children
128
Rethinking Urban Policy
in school or college, mortgages, and usually strong ties to the community.
Redundancy planning may be considered an adjunct to unemployment
insurance; instead of providing only a temporary stipend to offset cyclical
unemployment, it involves an active program of planning for change,
retraining, and placement in the event of structural unemployment.
Part of the cost of redundancy planning should be paid by the employer
when that is possible. Part may be considered legitimate public investment
in the human resources of an area and of the nation. The advantage of
such an approach is that it tends to increase the security of workers,
allowing technological progress to occur in their industry without unrea-
sonable labor resistance. It gives workers more bargaining power in the
labor market and more control over their own careers. It helps a community
keep its labor force up to date and in a position to compete for other
industries that need the kinds of skills for which the labor force is trained.
While retraining will make it easier for some workers to move, it can also
make it possible for others to stay and be productive or to move up the
local employment ladder. The community can then more readily accept
change rather than fear it or find itself reduced to spending its funds to
buy out a declining industry. It should not be necessary for a community
to hit bottom before it can begin to think about itself as a different kind
of place.
While redundancy planning, including education and training programs
and the mobility option discussed above, is the most urgent of the tran-
sitional problems raised by structural unemployment, attention must also
be given to the continuous training of the workers in a community who
take jobs that require a high degree of skill and training. This means
engaging the resources of a community for adult education, community
college, business-based education, and other education and training in a
broader and more intensive effort than has been common. It also involves
a higher degree of cooperation among private and public institutions.
Computer training and education is clearly a high priority. If computer
literacy is to be advanced in the school system, current teachers must
themselves become masters of these powerful machines that have become
as important to both practical and theoretical thinking as our standard
languages and traditional mathematics. Among other groups, office workers
are obvious targets for continuing education in computer technology. The
scientists and engineers of a community, in particular, must continuously
refresh their information and skills with new ideas and technology. In
~8 Rader (1982:18) argues that "computer literacy is essential if a person is to participate fully
in an information society, and will be as important as reading literacy."
Investing in the Future of the Urban Labor Force
129
fact, workers of almost all sorts will need to keep abreast of new tech-
nology.
One cautionary note is important in designing computer literacy pro-
grams. Advances in technology are rapid and computers are increasingly
usable by people with minimal training in programming. There is thus
risk that some forms of computer training could rapidly become obsolete
and virtually worthless. This suggests a tiered approach, with a program
for almost everyone that emphasizes basic skills and applications a sort
of driver training for a wide population of potential users. From the basics,
other tiers can be added for education in computer applications, mechanics,
and theory.
Any effective program in continuous education of a large part of the
work force represents a major departure from past practices. We have
tended to assume that most of the work force is already adequately edu-
cated, so that training efforts represent only a marginal part of the re-
sponsibility for the quality of work. Even so, the nation has been spending
$40 billion a year on training, and government has been contributing only
a little over $9 billion ($4 billion from state and local governments, $5
billion from the federal government) of the total (New York Times, October
17, 19821. This is a low level of commitment in comparison with that of
other economically advanced countries. If the United States had a retrain-
ing program with an effort equivalent to that of Sweden, for example, it
would involve a cost of at least $100 billion a year (Haveman, 19821.
Some of the added effort may be paid for by those who receive the training.
Even if it were entirely paid by employers and government, however, it
could be the most important investment made in the future of an area and
of the country (Drucker, 1981 :251~:
There is a need, above all, to realize that the labor force of today and even more
the labor force of tomorrow—represents a tremendous resource of knowledge and
experience which has to be continuously tapped and continuously upgraded. We need
to shift from the traditional approach of the nineteenth century which saw labor as a
"cost," to the approach which so far only the Japanese have taken, the approach of
seeing labor as a "resource" and therefore, as a "profit center" rather than a "cost
center." There is a need to organize the human resource around continuous learning
and continuous training.
The Role of Higher Education
If the public school system is the foundation for human resources in-
vestment strategies, the urban universities and community colleges are
the capstone. They should be considered as centers for investment in the
development of human capital (Rudnick, 19821.
130
Rethinking Urban Policy
The universities in an urban area are not of a piece. Some are traditional,
private institutions; others are truly national or international universities
whose mission is scarcely local at all. Perhaps the most important are
state or city universities, many of which are part of a multicampus system.
The universities of an urban area are internally complex, respond to a
variety of external interests, and are often ambivalent about the relationship
they should have toward their immediate environment. Notwithstanding
the difficulties that they present for participation in an urban strategy,
their contribution to such a strategy can be crucial, particularly in the long
term. '9
Taking advantage of the potential of the universities, however, requires
a sensitive understanding of their institutional limitations and of their many
roles in education, research, and public service, regardless of the fortunes
of their locations. Thus, many universities will consider themselves as
institutions that coincidentally are located in urban settings, while others
will characterize themselves as urban universities with a primary interest
in addressing the higher education needs of the local population (Brown,
19821. Community colleges and postsecondary technical schools have
generally been more aggressive in relating their programs to local labor
markets.
Universities and colleges are important parts of the local service econ-
omy. They can also contribute to the fund of intelligence necessary to
formulating local and regional economic development strategies. Our chief
interest, however, is in the university's role in developing human re-
sources. This involves three functions that are fundamental to the com-
petitive position of an area: (1) the education of minorities, (2) the
improvement of the primary and secondary educational system, and (3) the
continuing education and retraining of professionals, managers, and tech-
. .
nlclans.
The higher education of minority and disadvantaged students has be-
come a primary function of publicly supported urban universities and
community colleges. These schools enroll large proportions of minority
students, many of them graduates of weak secondary schools; low-income
students; part-time students; students of older average ages; and a generally
high percentage of married and working students (Rudnick, 1982:31~.
Despite these difficulties for students and for the institutions that such
populations pose, there is a need to support and expand such opportunities
and to assist students in completing their courses of study. Higher edu-
]9 For a discussion of the pitfalls of expecting too much from universities and other think tanks
in solving urban problems, see Szanton (1981).
Investing in the Future of the Urban Labor Force
131
cation is the surest way to break an intergenerational chain of poverty. It
is also necessary for entry into most credentialed occupations. At the same
time, the rising educational profile of an area increases its attraction for
employers in industries that are expanding and need well-trained workers.
A strong university in an attractive city provides a significant competitive
advantage. Over time it may even operate as a magnet, draining talent
from other places in a cumulative, reinforcing process. Inner-city uni-
versities and colleges are important stabilizing forces insofar as they help
offset the other competitive disadvantages of inner cities by reducing
migration flows. In some cases they can do much more, especially when
used as a focus for urban conservation and economic development.
In this sense an urban university can do more then Almost ~nv other
~ ~ —^ ~ ~ ~ _ ~ } ~ HA 4_A
institution to give an area a competitive edge over places that are not
mining the potential of their minority populations for entry into jobs that
require advanced training and education. This is a costly role, however.
It involves costs that are not imposed on institutions that confine them-
selves to traditional approaches to the education of traditional, full-time
students with good academic backgrounds. State funding formulas gen-
erally do not recognize the differences. States should revise these formulas
to provide priority support for higher education of minorities and the
disadvantaged. From a programmatic point of view, there is also a need,
both in urban universities and in the traditionally black colleges, to provide
and promote educational programs geared to the disadvanta~cl
Tl~ :~1 _1_ _r 1
~c~ _
111~ villa UrULld1 rOle Of uroan unlvers1nes in a human resources
strategy is fostering change in the urban school system. The universities
have a vested interest in the quality of primary and secondary education;
if its quality is high, they can dispense with remedial programs. They will
also attract more students who can be expected to do well in college,
having received a sound primary and secondary education in science.
mathematics, computers, and language.
As centers for teacher training and the development of educational
theory, universities are beginning to recognize an obligation for direct
involvement in local educational systems. For example, a project spon-
sored by the Ford Foundation currently involves state university presidents
and school superintendents in working relationships designed to increase
support for primary and secondary educational imorovem~nt~ anal hazer
preparation of students for higher education
, _ ~ ~ r _ . . _ . . . v a. . ~ V _ ~ ~ _ A
Ultimately, universities should be involved in restructuring the entire
urban educational system, including approaches to training and retraining
the adult work force. While some aspects of the educational system are
not directly associated with higher education, creating new techniques to
retrain redundant workers or to motivate and prepare new entrants to the
132
Rethinking Urban Policy
labor force requires a strong element of multidisciplinary research and
experimentation. Programs created through the association of area schools,
businesses, and unions can be major catalysts in the timely reform of both
public and corporate training and education.20
Urban universities are also a valuable resource for the private sector in
terms of training and retraining professionals and other workers. Uni-
versities can develop strong relationships with the private sector through
the use of industry professionals in their teaching programs; through re-
search and development programs, including industry-sponsored research;
and in the analysis of new technologies and related educational needs.
Involvement of a university in the economy of its region can be of material
assistance in keeping that economy competitive.
The experiences of Silicon Valley, the Boston area, and North Caro-
lina's Research Triangle illustrate how important university-related eco-
nomic development strategies can be. To be sure, the universities involved-
Stanford, Harvard and MIT, and Duke and the University of North Car-
olina are unique and strong institutions. But many less prestigious uni-
versities have strengths that could be harnessed for economic development.
They may not be able to generate a Silicon Valley, but they can support
other activities that materially improve an area's economy (Sheridan,
19821.
To some extent, universities are in competition with advanced education
programs offered within industry, programs that in part have been de-
veloped because of default by institutions of higher education. Many of
these programs could be recaptured by educational institutions, which
alone are able to offer the credentials often required for professional
advancement. To do so, however, urban universities would have to accept
the obligation to provide continuing degree and nondegree education for
professionals and to ensure that the quality of these programs matches or
exceeds that which industry can provide alone. Universities may also have
to be more flexible in allowing industry a sufficient say in the content
and methods of instruction for special courses and programs. Particular
attention might be given to the educational needs of managers and profes-
sionals in smaller, growing firms that lack the capacity to provide in-
house education on a par with that provided by large international cor-
porations. Universities could provide such programs on a cooperative
basis, with smaller firms providing development programs that offer the
20 An illustration of how a university might approach this task can be found in the proposal of
Wayne State University to establish a comprehensive education and training program to retool
Michigan's automotive work force for new jobs and career mobility (Rudnick, 1982:24).
Investing in the Future of the Urban Labor Force
133
quality of the large corporate career development programs at relatively
modest costs for each firm. In this way, university education could also
be directly related to local economic growth.
SUMMARY
The economic fortunes of our urban areas rest on their human capital,
which has replaced factors such as natural resources as the major source
of comparative advantage among firms and urban areas. That human
capital can become as obsolete or inappropriate for competition in an
advanced economy as deteriorating infrastructure and antiquated industrial
plants and technology. It must be continuously renewed.
Most American cities have a large pool of underdeveloped human capital
in their existing labor forces and in those people who could enter the
economic mainstream in years to come if they are adequately trained and
educated. Well-trained workers are, of course, mobile if they choose to
be. But a well-trained labor force is also a major attractor of capital. Since,
in most instances, capital is more mobile than labor, the development of
a region's human resources is probably the most useful investment that it
can make in its own future.
In this chapter we have recommended that in devising a strategy for
investment in its human resources, the nation and its urban areas should
first invest in developing the basic knowledge and skills without which a
worker cannot function in the economic mainstream. These include a
working knowledge of science, mathematics, and computers and, above
all, a level of literacy that is functional to the type of society and work
environment that will exist. Particular attention should be given to edu-
cating and training the disadvantaged youth of the inner city. They rep-
resent a substantial resource that the nation cannot afford to waste, particularly
as the number of new entrants to the labor force declines from rates of
the last two decades. Without training they will operate as a brake on the
rest of the economy, requiring expenditures on which no return can be
expected.
Second, we have recommended that substantial investments be made
in maintaining knowledge and skills and in retraining dislocated workers.
Redundancy planning should become a regular function of national, state,
and urban governments working in combination with industries, univer-
sities, and schools. We are particularly concerned with productive older
workers who happen to work in industries that must change the nature of
the work they offer or even their locations in order to remain competitive
or to stay in business at all. Retraining such workers is essential if they
are to maintain their incomes and to find new jobs. It is also essential to
134
Rethinking Urban Policy
their communities and to industry itself to reduce resistance to economic
change and growth.
Third, we have recommended that special attention be given to the role
that universities might play in a strategy of investment in human resources.
Urban universities are in a position that allows them to be catalysts in
bringing together the public and private parties necessary to make in-
vestment strategies work. Urban universities are also in a position to offer
both moral and intellectual leadership in restructuring urban educational
systems, in rethinking their own role in preparing minority youth for the
new world of work, and in continuously refreshing the knowledge of the
professional labor force.
As in other topics discussed in this report, these elements are not in-
dependent of each other. They are interrelated parts of a strategy of using
existing resources to expand economic opportunities and to foster new
enterprises and development.
