People and Places Left Behind:

As leaders in the United States and Europe develop approaches to manage the future of work, they should prioritize economic development policies that target distressed regions and the people who call them home.

While distress can be measured multiple ways, one way to measure it is using prime-age employment rates, the number of individuals aged 25-54 who are working. For purposes of this piece, distressed areas are those with a disproportionately high share, compared to other areas, of prime-aged individuals who are out of the labor force. Unlike unemployment data, prime-age employment rates capture not just unemployed jobseekers, but also those not pursuing paid work at all, making it a more complete economic indicator.

According to the Organisation for Economic Co-operation and Development (OECD), the U.S. has a prime age-employment rate of 80.7% and the EU, a rate of 82.1% , per most recently collected data. For the U.S., a rate this high has not been seen since 2001 and comes on the heels of historic and recent significant investment in communities through the American Rescue Plan and CARES Act COVID-19 recovery packages, as well as the CHIPS and Science Act and the Infrastructure Investment and Jobs Act.

While both rates are up considerably from sharp drops during the height of the COVID-19 pandemic, they paint an incomplete picture of the challenges facing specific EU member states, the U.S., states, regions, and most granularly, zip codes. For example, EU countries’ prime-age employment rates range from a 73.3% in Italy to 89.4% in Slovenia. There are also considerable ranges within member states. In the U.S., per the Economic Innovation Group (EIG), almost 48 million Americans, or 14.8 % of the population, live in economically distressed communities. These areas represent “a left-behind America that bear signs of profound disconnection from the country’s overall economic success.” Here 34.5 % of primeage adults are not working.

Why should policymakers care, especially if the EU and U.S. as a whole are showing signs of improvement? First, paid employment generates both taxable income and additional consumer spending, which can help shore up government funding sources for needed projects and programs. Second, the unemployed often rely more heavily on state social programs, which can increase government costs. Finally, unemployment and financial stress have been linked to rising rates of “deaths of despair”, meaning deaths caused by overdose, alcoholrelated diseases, and suicide. In the U.S., life expectancy has declined since 2014, and the largest contributing factor to rising mortality is these deaths of despair. In a study of 16 wealthy nations, the U.S. was unique because life expectancy has been trending down.

So, what can be done? Each region’s circumstances differ and, accordingly, require tailored responses. However, four common and addressable problems experienced by persistently distressed regions are:

• lack of job opportunities with family-sustaining wages;
• lack of local grant writing capacity or funds;
• lack of applicable training and skills for workers; and
• lack of worker supports (e.g., childcare, family care responsibilities, workforce housing, transportation, benefits cliffs).

The first two challenges above correspond with place-based economic development, approaches that aim to improve the well-being and quality life in a specific geographic area, such as a local labor market, city, region, or community, most commonly by increasing prime-age employment rates. The second two more closely correspond with people-based economic development, referring to resources provided to individuals or groups of individuals regardless of where they are located. While some economists and policymakers prefer a people or place-based approach and view them as competing or conflicting strategies, there are viable and worthwhile policy solutions in each category which can be combined.

This paper proposes place and people-based economic development policy recommendations that deserve additional consideration from U.S. policymakers and those across the Atlantic.

PLACE-BASED ECONOMIC DEVELOPMENT POLICY RECOMMENDATION: THE RECOMPETE ACT

As the 117th Congress worked on legislative packages to bolster the U.S. economy and its economic competitiveness, Representative Derek Kilmer (D-WA-06) put forth the Rebuilding Economies and Creating Opportunities for More People to Excel (RECOMPETE) Act, a bipartisan, place-based economic development bill.10 The RECOMPETE Act in pilot form was included in the CHIPS and Science Act of 2021 and funded at $200 million in the FY2023 Omnibus appropriations bill. The U.S. Economic Development Administration (EDA) is implementing the program, which specifically targets distressed areas with high prime-age employment rates.

Persistently distressed areas are less likely to have the capacity or local grant writers necessary to navigate the federal grant application process, and less likely to have local funding matches or cost-shares from local governments that are often needed to unlock federal grants. Similarly, they are less likely to have their long-term challenges addressed by short-term, adhoc grants. Therefore, they can lose competitive grant processes to better-resourced but less high-need areas.

To address the first barrier, the RECOMPETE Act pilot program was designed to help communities develop initial RECOMPETE plans. The first round of funding, in the strategy development grant phase (Phase I), provides communities with up-front technical assistance and initial funding so that communities can first develop locally tailored and data-driven plans to outline how they will reduce prime-age employment gaps, should they win a subsequent strategy implementation grant award (Phase II).

To address the second set of barriers, the RECOMPETE Act pilot program’s strategy implementation grants (Phase II) provide significant, upfront, flexible and long-term support over multiple years. This will allow communities to address the multiple, primary challenges to job creation and retention. This can include lack of infrastructure, bottlenecks at entrylevel positions due to insufficient job training opportunities, inadequate business investment, shortages of affordable or workforce housing, lack of affordable childcare, and a general mismatch between available skills and available jobs, among other causes. Solutions will look different in every community. But research has shown that investments in workforce outreach and training, infrastructure and housing development, job retention programs like childcare and transportation assistance, and resources for small businesses and entrepreneurs are among the most cost-effective ways to boost lasting employment and wage growth.

The EDA recently closed Phase I applications for the RECOMPETE pilot program. The agency received 565 applications from 49 states, the highest volume of applications for any national grant process run by the agency in its history. Congress is negotiating FY2024 funding levels for all federal government spending, including the RECOMPETE pilot program. For it, and other similar place-based economic development programs to achieve their potential of positively impacting the most needy regions, lawmakers must continue to adequately fund it.15 As experts from the Brookings Institution recently wrote, adequate funding for the pilot will also allow better measurement of the program’s effectiveness at improving employment and earnings in pilot areas. Ideally, data on the best strategies to reduce prime-age employment rates from the RECOMPETE Act and other place-based programs in EU countries can be shared to continue to inform how policymakers can best support persistently distressed regions.

PEOPLE-BASED POLICY RECOMMENDATIONS: THE SKILLS INVESTMENT ACT, REBUILD SKILLS ACT AND TIME TAX

Workers need the right education and skills to get employed, and often they also need access to work-adjacent resources such as transportation and childcare to stay employed. For some, especially in the U.S., the cost of college and opportunity cost of lost wages puts higher education out of reach. For others, on both sides of the Atlantic, individuals may have trained for a specific job that proved vulnerable to outsourcing, was made obsolete by technology, or fell victim to regional decline due to broader economic forces, as in the Rust Belt and Ruhrgebeit, and in British and American mining towns.

While it is heartening to see some employer-financed “learn and earn” models surfacing in the U.S., where employers pay to train and retrain their employees, and are more popular especially in Germany and Austria, among other EU countries, these opportunities remain limited.

Accordingly, two bills in Congress related to people-based economic development are worth mentioning. The Skills Investment and Rebuild Skills acts should be considered in a forthcoming tax package or in the reauthorization of the Workforce Investment and Opportunity Act (WIOA) respectively. First, the Skills Investment Act would allow individuals to use tax-advantaged savings accounts to pay for education and skills training programs throughout their lifetime, replacing current age-based restrictions that impede mid-career workers. The bill also doubles the savings contribution limit. Finally, and importantly, it also provides a 25% tax credit to employers to incentivize their contributions to an employee’s account. This would allow for the establishment of a kind of “lifelong learning account”, a concept that France has already embarked on with the French Compte Personnel de Formation (CPF). Separately, the forthcoming Rebuild Skills Act, would provide a flexible skills training credit of up to $3,000 per person facing long-term unemployment for the purpose of enrolling in an education or training program that provides indemand skills.

Finally, people and place-based economic development strategies’ success relies on adequate worker support, from workforce housing to transportation to childcare. Annie Lowrey, an American journalist, coined the term the “time tax” to refer to the time Americans spend each year fighting their own government’s bureaucracy to attain services for which they are eligible. U.S. President Joe Biden has issued a related executive order directing federal agencies to improve the customer experience for Americans interacting with high-impact service providers (e.g., Centers for Medicaid and Medicare Services, Department of Housing and Urban Development, Department of Veterans Affairs). Members of Congress have also asked the Government Accountability Office (GAO) to look into how federal programs can better serve the most economically disadvantaged. Finally, states are experimenting with providing universal eligibilities across multiple social service benefits, and are studying the impact on an individual’s ability to find work and stay employed. The idea behind it is that a person who can meet their short-term material needs is more able to focus on securing their longterm career. EU member states such as Estonia have paved the way for what streamlined and accessible benefits systems can look like.

THE SOLUTIONS ARE EVIDENT

The challenges facing economically disadvantaged communities in the U.S., Europe and beyond are not intractable. There are many worthy place and people-based economic development policy solutions available on both sides of the Atlantic. For the future of work to work, people and places that have faced persistent distress should be front and center.

The opinions expressed in this article are the author’s alone. She has worked on several pieces of legislation mentioned in this article.

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