Request for Information on the Prosperity Gap Submission to the Select Committee on Economic Disparity and Fairness in Growth of the U.S. House of Representatives

March 15, 2022

Submitted on March 15, 2022 to the Select Committee on Economic Disparity and Fairness in Growth

Question 5. Labor Market Policy: How can the federal government (or other entities) support increased pay for workers and prevent discrimination in the workplace?

There are several important policies that can be effective in increasing the pay of workers and preventing discrimination in the workplace. I will just focus on one which I think does not receive enough attention, consideration, and funding: direct job creation by the federal government.

As Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research, has argued:

. . . even when overall U.S. unemployment is low, jobs are in short supply for many groups, such as those with less education, racial minorities, and residents of high-unemployment cities. Increases in aggregate demand in the U.S. economy do significantly help the poor. However, the effects of those increases are not strong enough to come close to “solving” poverty. More targeted labor demand policies are also needed.

We can see this problem in several communities in 2019. Although in 2019 the national unemployment rate was at its lowest rate since the 1960s, many American communities still suffered from high unemployment. For example, in the majority white community of McDowell County, West Virginia, the annual unemployment rate was more than double the national rate. The unemployment rate was also more than double the national rate in the majority Black community of Detroit and in the majority Native American community of Oglala Lakota County, South Dakota. In the majority Latino community of Porterville, California, the unemployment rate was more than three times the national rate. These and many other communities suffered from a high unemployment rate during a period with a historically low national rate.

If we want to bring economic opportunity to all American communities, the federal government should support direct job creation, subsidized jobs, and apprenticeships for the long-term residents of these persistently high-unemployment communities. This type of job creation is not unprecedented. During the Great Depression, the millions of jobs created by the Works Progress Administration helped to drop the national unemployment rate from 23 percent in 1932 to 6 percent in 1941 (unemployment rates from Michael R. Darby, “Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941,” Journal of Political Economy 84(1), February 1976: 1-16). More recently, during the Great Recession, the federal government created a quarter of a million jobs through the TANF Emergency Fund.

A new federal subsidized jobs program should provide significant multi-year support for job creation to high-unemployment communities, enough support to move these communities from high unemployment to low unemployment. This program should also provide assistance to local communities in developing broader community economic development plans so that the communities can maintain relatively low levels of unemployment after the federal support ends.

Algernon Austin
Director, Race and Economic Justice
Center for Economic and Policy Research
1611 Connecticut Ave. NW, Suite 400
Washington, DC 20009

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