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A city thrives when its residents thrive. Yet many families, even though they are employed fulltime, continue to struggle to meet their families' basic needs. Local elected officials across the country have discovered a way to strengthen working families while bringing more federal dollars into the local economy: by connecting eligible workers to the Earned Income Tax Credit (EITC).
Small businesses are the lifeblood of the economy in the United States. Based on data from the U.S. Census Bureau, the Office of Advocacy at the U.S. Small Business Administration documented that small businesses accounted for over 92% of the net new jobs creation between 1989 and 2003. The smallest among the small businesses (those employing fewer than 20 employees) accounted for 85% of the net new job creation over the same period. In essence, the vast majority of the new jobs created in the economy come from the very small businesses. Of the total 21.8 million jobs created between 1989 and 2003, small businesses under 20 employees created 18.6 million jobs, small businesses with between 20 and 500 employees created 1.5 million jobs, and large businesses and companies (with over 500 employees) created only 1.7 million jobs. Similarly, while small businesses created net new jobs in 12 of those 14 years, large businesses eliminated more jobs than they created in 5 of those 14 years.
Philadelphia has the worst poverty rate of the ten largest U.S. cities. Twenty-eight percent (28%) of Philadelphians - between 430,000 and 440,000 people - live below the federal poverty level. This includes 39% (135,000) of our children, 27% (265,000) of our working age adults and 17% (32,000) of our seniors. Some 1,500 families become homeless every year, including over 3,000 children. Many Philadelphians live above the federal poverty line but still face difficult choices, like whether to pay a utility bill or put food on their table. Poverty is a social problem. The City suffers from lost tax revenue, an increased tax burden, and a deterrent to the location of new businesses, jobs and income earners. All Philadelphians have a vested economic interest, if not a moral imperative, to fight poverty. Poverty diminishes the quality of life for everyone and tarnishes our city's reputation as a vibrant, thriving place to live, work, and play.
We document a negative correlation, at business cycle frequencies, between the net job creation rate of large employers and the level of aggregate unemployment that is much stronger than for small employers. The differential growth rate of employment between initially large and small employers has an unconditional correlation of -0.5 with the unemployment rate, and varies by about 5 percent over the business cycle.
Almost 22 percent of children are poor. In 2012, over 16 million children in the U.S. were living in poverty according to the official measure, defined as living in families with income under $19,090 for a family of three. This is almost identical to figures for 2011, but an increase of nearly three million and 4 percent over 2007 (the last year before the Great Recession). Children are more likely than adults to be poor.
Economic development is the process of building strong, adaptive economies. Strategies driven by local assets and realities, a diverse industry base and a commitment to equality of opportunity and sustainable practices have emerged as those that will ensure a strong foundation for long-term stability and growth. Even within the parameters of these principles, what constitutes success in economic development and the specific strategies to accomplish it will look different from place to place. Despite these differences, leadership is consistently identified as a critical factor in effective economic development. Dedicated leadership is needed to raise awareness, help develop and communicate a common vision, and motivate stakeholders into action.
An analysis of more than 4,200 economic development incentive awards in 14 states finds that large companies received dominant shares, ranging between 80 and 96 percent of their dollar values. The deals, worth more than $3.2 billion, were granted in recent years by programs that, on their faces, are equally accessible to small and large companies. Yet big businesses overall were awarded 90 percent of the dollars from the programs analyzed, indicating a profound bias against small businesses.
These are uncertain times. As the country barely inches its way out of the Great Recession, its economic future is unclear. The growth model of the past decade - based on a housing bubble, creditfueled consumption, and a deregulated financial industry - is failing nearly everyone. This model was not only unsustainable, but it also did not deliver on the American promise of shared prosperity. A few at the very top ran away with nearly all of the gains, and almost everyone else lost: Their wages stagnated, their assets evaporated, their jobs disappeared, and their safety net unraveled. The most vulnerable - low-income people and people of color - were hit first and worst. They are still waiting for a recovery that continues to sputter along and is at risk of "double-dipping" into another recession. At the same time, a major demographic transformation is well underway. The very same racial and ethnic groups who have long been left behind in America are quickly growing in number and population share. By the end of this decade, the majority of youth will be people of color. By 2030, the majority of workers under age 25 will be people of color. And by 2042, the majority overall will be people of color. To secure the future in the face of such economic and demographic upheaval, this nation needs a new growth model - one that builds on our assets, leaves the generations to come with a strong foundation for the future, and brings us closer to the ideal of American prosperity. Like California in the 1950s and '60s, under both Republican Governor Earl Warren and Democratic Governor Pat Brown, the nation's public- and private-sector leaders need to recognize that preparing the changing population for the needs of the modern economy is the key to our future; they must make investments that allow all people to maximize their potential. This new growth model must be driven by equity - just and fair inclusion into a society in which everyone can participate and prosper. Achieving equity requires erasing racial disparities in opportunities and outcomes. Equity is not only a matter of social justice or morality: It is an economic necessity.
The situation of high unemployment for black men is not new. It has persisted for decades, and scholars, sociologists, economists, policy makers, and advocates have brought attention to various aspects of this challenge and put forth solutions. Yet, it is seemingly an intractable situation. In 2012, three years after the end of the recession, the black male unemployment rate was in the double digits for every age category up to age 65. This was not the case for any other racial group. In 2010, half of working black men were employed in the two occupational clusters with the lowest average earnings. The situation was the same in 2000, and in 1990. In addition to being disproportionately represented in low-wage occupations, black men are much more likely than white men to be working part-time and to experience longer durations of unemployment.
Our key substantive finding is that early improvements in child health, academic achievement, and behavior as well as improved parenting can yield sizable economic benefits for adult earnings. This is all the more striking when we recall that our estimates, for the most part, capture only a portion of the effects that early interventions are likely to have. Given data constraints for early achievement, attention, and the home environment we have focused on effects that work through improvements in school achievement in adolescence and that result in gains in one adult outcome, earnings. We have ignored effects that work through other intermediate outcomes, such as behavior and health, including peer effects, as well as effects on other adult outcomes, such as physical health. Moreover, our estimates do not take into account any synergies that might arise from concurrent improvements across more than one domain. If we could measure the full range of effects, the economic payoffs would surely be much larger than those estimated here.