Today's date:
Winter 1987

Dual Cities: The New Structure of Urban Poverty

John Kasarda is chairman of the sociology department at the University of North Carolina at Chapel Hill. He has been analyzing recent Census Bureau Data, including the Current Population Survey data of March 1985, in an effort to determine why the growth of the American economy has left the core of urban poverty untouched.

We asked Professor Kasarda to briefly summarize his findings. We then questioned him on the implications of structural economic change for the black urban underclass and what policies might help remedy their predicament.

The plight of underprivileged city residents is no better today than before federal anti-poverty programs were initiated over two decades ago. In many respects, their condition is worse. We've witnessed the formation of a large, relatively permanent subgroup of poor, unemployed and dependent individuals. This underclass grew despite huge infusions of public assistance and it has persisted in northern cities in the face of recent economic recovery. This has occurred because of overarching technological and economic dynamics that have changed the role of major cities and dramatically reduced their capacity to offer jobs to the unskilled.

The American city is a different place today than it was in the early 1960s when our assumptions about urban poverty were formed. Advances in transportation, communication and industrial technologies, interacting with the changing structure of the national and international economy, have transformed out major cities from centers of material goods production to centers of information exchange, finance and administration.

In this process many blue collar industries that once constituted the economic backbone of cities, and provided entry-level employment for their lesser skilled residents, have vanished. These blue collar industries have been replaced, at least in part, by knowledge- intensive white collar industries with educational requirements that preclude many poorly-educated minorities from obtaining employment.

For example, by 1980, New York City and Boston each had more employees in information processing industries - where executives, managers, professionals and clerical workers dominate - than in their manufacturing, construction, retail and wholesale industries combined. This is a dramatic metamorphosis since 195 3, when employment in these traditional urban industries outnumbered information-processing employment by a 3 to I margin.

Blue-collar employment decline has been exacerbated by the urban exodus of middle income residents and the neighborhood business establishments that once served them. This exodus further weakened secondary labor markets and eroded local tax bases. It also increased the spatial isolation of the poor, leaving them in economically distressed neighborhoods where there are few prospects for employment. Between 1967 and 1982, the twelve major Northeast- Midwest cities from Boston and Philadelphia to St. Louis and Milwaukee lost 1.6 million jobs, of which 1.3 million were in the manufacturing industries. During the same period, the suburban rings of these cities added 2 million jobs.

Since the 1980-82 recession, a number of northern cities have experienced renewed job growth led by employment gains in their information-processing industries. Yet, manufacturing employment in these cities continued to decline. New York City, for instance, gained 239,000 jobs from 1980 to 1986 - a 7% overall increase - but lost 108,000 jobs in its manufacturing firms - a 22% drop.

While millions of blue collar jobs were disappearing from our cities - the very jobs that in the past attracted and socially upgraded waves of disadvantaged migrants - minority residents who lack the education for employment in the new information-processing industries have increased. By 1985, racial-ethnic minorities composed the demographic majority in most of our largest northern cities.

These demographic and employment base changes have resulted in a serious mismatch between the skills of many residents and the skills required by the new urban economy.

Accordingly, unemployment rates of poorly educated urban minorities have risen sharply since the late 1960s. In central cities in the Northeast, unemployment rates of black males without a high school degree rose from 7.6% in 1969 to 26.2% in 1982. Whereas unemployment rates of black males in these cities who had at least a high school degree fell sharply during the recent economic recovery, the unemployment rate of those without a high school degree continued to climb - reaching 30.4 percent in 1985

The economic displacement of urban blacks has been accompanied by numerous other problems including high crime rates, drug abuse, family dissolution, out-of-wedlock births and isolation in segregated areas of decline. In such cases, where husband-wife families are few, pimps, pushers, and toughs replace working fathers as role models for young males. Their cultural isolation and socialization-by-the-street prevent many from developing interpersonal skills that are as important as technical skills in obtaining and holding a job.

Opportunities limited by poor technical and social skills are further reduced by racial discrimination and urban blue-collar employment decline.
Without jobs, and without much hope for jobs, the black underclass is caught in a bind unprecedented for urban dwellers in this country.

NPQ: The champions of Reaganomics have made much of the 8-10 million jobs created by the American economy in the past decade. Have these jobs been in the service industries? Have they been located in the cities or the suburbs?

Kasarda: These jobs have been mainly service sector jobs. Over the last decade, the economy has, in fact, been driven by the substantial growth of service sector jobs, a category that is extremely broad and includes a range of occupations from boot blacks to brain surgeons. Many of the jobs created have been low-skill, as well as low-wage, in nature. For example, between 1975 and 1985 over 2.1 million nonadministrative jobs were added by food and drink establishments. This is more than the total number of production jobs that exist in our automobile, steel and textile industries combined.

While the economy has created millions of low-skill service jobs, virtually all such growth has been in the suburbs, exurbs and non- metropolitan communities, far removed from the concentrations of unemployed entry level labor in the cities. It Is both an irony and a tragedy that we have such huge surpluses of entry level labor in the inner cities while suburban businesses are facing serious entry level labor shortages.

NPQ: What kinds of jobs are being created in the cities and who is taking them?

Kasarda: As suggested above, these jobs are predominantly in information -processing industries that typically employ persons with substantial education. Since 1970, northern cities have lost huge numbers of jobs in industries where the jobholders typically have not completed high school while experiencing employment gains in their industries where average jobholder education levels exceeded one year of college. Unfortunately most of the latter jobs have been taken by suburban commuters.

NPQ: And how does the average education level of black city residents match the educational requirements of new urban growth industries?

Kasarda: While the educational qualifications of minorities have improved during the last two decades, that improvement has not kept pace with the increasing education qualification levels of urban growth industries. In northeastern cities, only 22% of black males aged 16-64 had received more than one year of higher education and 43% had not completed high school. So the distribution of education of blacks in the cities still remains totally mismatched with the distribution of changing job market requirements. This is the essence of black structural unemployment.

NPQ: What about the remaining poor black and Hispanic core? Are they immune from the progress in the mainstream economy?

Kasarda: The national economic recovery hasn't improved the conditions of the urban underclass precisely because they have become permanently detached from mainstream employing institutions.

NPQ: If they are outside the mainstream economy, how are they staying afloat?

Kasarda: In fact, three economies are operating that sustain cities and their residents today. The first is the traditional employing institutions which are the mainstream economy - everything from what remains of factory jobs to investment bankers - in other words, on-the-book employment.

The second is the underground economy the vast off-the-book activity, much of it legal and much of it illegal. There are numerous barter-type transactions and a substantial amount of economic exchanges conducted with petty cash that goes unreported. The $10 and $15 dollar cash transactions that take place millions of times a week in some of our larger cities are frequently off the books. And of course there are dealings in drugs, prostitution and other illicit activities.

The third economy is the welfare economy public housing assistance, food stamps, AFDC, etc. It grew very rapidly in the late 1960s and early 1970s, but has since leveled off The second and third economies function as institutionalized alternatives for those displaced from the first, and account for a substantial portion of the overall economy of many cities.

NPQ: When you talk about jobs being created for investment bankers in downtown Manhattan, they have to have secretaries and word processors. Who takes those jobs?

Kasarda: At the very minimum, these jobs require a high school degree and, increasingly, education beyond high school. A well-educated, articulate secretary is in much demand in the corporate offices of Manhattan and is paid accordingly. On the other hand, the secretary who has communication problems and cannot spell, or whose interpersonal skills do not measure up, will have increased difficulty obtaining and holding a job in the information-age city.

NPQ: To what extent does what we've been talking about apply to other cities outside of the Midwest-Northeast corridor, like Atlanta, Phoenix or Los Angeles?

Kasarda: Atlanta is similar to the situation in the Northeast and Midwest in terms of structural change. It is losing manufacturing jobs, but its white collar job growth has more than compensated, accounting for net job increases. The automobile age cities, such as Los Angeles and Phoenix, are not losing blue collar jobs at the precipitous rate of those cities once based on heavy industry. We don't see economic displacement here on the scale we do in the Midwest. But the emerging problems are analogous. If the residents of the Sun Belt cities do not achieve the education levels for the knowledge -intensive employment that is sure to grow in all cities as we approach the 21st century, they too will face structural unemployment as severe as that now faced by cities in the Northeast and Midwest.

The sobering dimensions of the future problem can already be seen in the analogous high school dropout rates between New York and Los Angeles. The fact that four out of ten students are not completing high school is extremely worrisome, for it comes at a time when not only the high school degree is required, but education beyond high school is needed to prosper in the urban job market.

There is another troubling aspect to the skill mismatch. Following the postwar baby boom, we had the baby bust, meaning that labor force growth will undoubtedly fall. Unless larger percentages of central city and metropolitan youth complete high school and go on to receive some higher education, there will be a severe shortage of qualified labor to meet industry needs by the 1990s and beyond.

NPQ: What are the policies for increasing employment in cities and improving opportunities for their disadvantaged residents?

Kasarda: The idea of reindustrialization and rebuilding the historic blue collar employment base of the cities is not feasible. Government subsidies, tax incentives and regulatory relief contained in the existing and proposed jobs-to-people policies are not sufficient to overcome technological and market forces that are draining cities of their blue collar industries. The era of factories and heavy industry in the cities is past.

Successful cities of the future will need to develop an information age municipal infrastructure, such as wiring the cities with fiber optics and broadband cables as well as providing "teleports" - massive telecommunications receiving and sending ports - and supercomputers to service growing information processing industries on a time-and-cost sharing basis. Moreover, our larger cities have become world cities. They've gone beyond nationally important economic units. In the information age, airports are the key variable of transportation access. Cities that nurture their national and international accessibility through unrivaled airports will be successful.

A second set of required policies should focus on educational upgrading. Programs geared to keeping inner city youth in school and improving the quality and quantity of their education are absolutely essential to longer-term solutions of skill mismatch.

The dilemma of presently displaced workers and dropouts calls for a third set of strategies complementing jobs-to-people plans and educational upgrading strategies - people-to-jobs strategies.

As I've discussed, growth in entry level and other blue collar jobs has been primarily in the suburbs, exurbs and nonmetropolitan areas. The question is what policies might be implemented to better spatially match displaced low-skill labor in the cities with growing demands for entry-level labor in outlying areas?

There are a number of strategies here that would be helpful, ranging from computerized job opportunity networks to subsidizing distant job searches of the long-term unemployed, to housing vouchers and strict enforcement of fair housing laws. It is also essential that there be a thorough review of public assistance programs to ensure that they are not inadvertently anchoring those with limited resources in areas where jobs matching their skills are declining.

During the past decade, our policies have been guided by the reasonable principle that public assistance should be targeted to where the needs are the greatest as measured by such factors as poverty rate and persistence of unemployment. The idea is that the most distressed areas should receive the largest allocation of government funds for a full range of subsistence and social support services for the economically displaced and others left behind.

Unquestionably, these policies helped relieve certain problems such as the inability of the unemployed to afford private sector housing or obtain adequate nutrition and health care. But they did nothing to reduce the mismatch between the resident labor force and the available urban jobs. In fact, this spatially concentrated assistance may be inadvertently increasing the mismatch and the plight of the poor by anchoring them to inner city areas which, by definition, are the most economically distressed.

For those individuals with some resources and for the lucky portion whose efforts to break the bonds of dependency succeed, spatially concentrated public assistance will not impede their mobility. But for many inner city poor without skills, local concentrations of public assistance and community services can be sticking forces.

Given their lack of skills, if they were to move, the opportunity cost of giving up their in-place assistance is too high. Poor people may be poor, but they are not stupid. They are rational economic calculators every bit as much as the middle class.

They see themselves as better off with their marginal but secure in-place government assistance than taking a chance and moving in search of a minimum wage, entry level job.

Yet, such immobility - whether because of racial discrimination, lack of resources or government subsidized anchoring - poses substantial long-term costs to both the underclass and the cities where they reside because cultural isolation, intergenerational transfer of poverty and high social overhead are burdens that strain municipal budgets.

The aim of people-to-jobs strategies is not only to bring about a better balance between local supplies and demands for labor, but also to facilitate the means by which disadvantaged Americans historically obtained economic opportunity and a better life. In this regard, it is not fortuitous that the three great symbols of social and economic opportunity for America's disadvantaged all relate to migration - the Statue of Liberty, The Underground Railway and the covered wagon.

NPQ: Would you say that the reason the Great Society programs did not affect this urban underclass in any structural way was because they happened to be implemented during the same period in which our economy was shifting from a manufacturing to an information basis, in effect annulling many of the efforts?

Kasarda: There is much to be said for this view. Let me add, though, that if you look at the original thinking behind the Great Society, a major premise was that poverty was primarily a result of insufficient income. It was thought that if the poor could be provided basic income, then many of the other problems facing them would be resolved and they would eventually become economically self-sufficient.

We found out that was not the case. What happened was that welfare made it easier for the poor to remain separate from the economic mainstream. Thus, instead of a new middle class, a new dependent class emerged, more isolated than ever.

The reason the underclass is not being lifted up by the rising tide of economic prosperity is that most aren't even on the boat! Getting them back on board is perhaps the most critical challenge that future domestic policies must meet.

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