Exploring How The Great Recession Affected Jobs, Local Governments

Cleveland. (Tony Ganzer/WCPN)
Cleveland. (Tony Ganzer/WCPN)
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Even years later, academics are still sifting through data from the Great Recession to get a sense of what actually happened to the economy, and how state and local governments have had to cope. A new study in the journal State and Local Government Review began with the question: where did the jobs go during the recession? And what does the employment reality now mean for 47 metropolitan areas of at least one million people…like Cleveland. David Swindell is co-author of the study, and director of Arizona State University's Center for Urban Innovation. He spoke with ideastream's Tony Ganzer.

SWINDELL: “They kind of shifted around a bit. The actual numbers: a lot of cities have actually recovered, and they’re back to their pre-recession levels. But what changed was the employment sector make-up of the jobs that were there before versus the jobs that are there now. That has serious implications for how it is local governments are financed.”

GANZER: “How is it that a major recession and housing crisis did not exacerbate trends already in progress?”

SWINDELL: “We kind of expected that that would’ve exacerbate these larger trends. And these larger trends—Cleveland being a really good example of these over the last several decades—seeing both an out-migration of citizens from the central city to the suburbs, but also of regional population shifting to southern cities. Prior to the recession, particularly the intraregional shifts from central city to the suburbs, was already beginning to slow down. And so when the recession hits, what we find is that people are actually not moving out from the central cities nearly as much as they were before, and you see a similar pattern with regards to jobs. Some jobs did dry up, but they were replaced with other jobs by the end of our study period in 2012. And depending on which sector you grew in or shrank in, that can have significant implications for local public financing of public services like police, fire, teachers, etc.”

GANZER: “You broke down metro areas into four categories, based on the percentage of the region’s jobs that sit in the central city—Cleveland has less than 25% of the region’s jobs. What are some of the side-effects of having more jobs not in the central city?”

SWINDELL: “If those cities have lost population and jobs, then there’s less to be taxed to pay for the maintenance on that infrastructure, which will just fuel the inability of those same cities to attract new jobs and new residents, so it becomes kind of a downward spiral. So if you can’t capture the taxes from those individuals when they’re commuting in, then you’re going to have to rely on the remaining population in your central city, which is typically a poorer population, to support the taxes and the infrastructure for the jobs the people who live outside the city are occupying. So that becomes kind of a weird reverse-subsidy of poor people subsidizing jobs for wealthier individuals who are living outside the city. Ohio is a little different than most states, in that the state legislature there allows local governments to utilize a wage tax, so at least there’s the opportunity for Cleveland, for instance, to capture some of the economic activity from some of those people coming from out of town coming in to Cleveland to work. But most states don’t have that option.”

GANZER: “You mention wage taxes, or commuter taxes, and this is an important aspect also when you look at the proportion of jobs which are in the healthcare industry, or education sector, where they’re not paying regularly property taxes because they might be exempt.”

SWINDELL: “Right, a lot of those organizations are non-profit or are public sector, and those don’t typically pay something like property taxes. So the higher the proportion of those kinds of jobs that you have in your community, the less likely those firms are to be paying your property taxes. Management, information, and professional science jobs, those are the kinds of jobs that are going to be associated with both sales taxes and property tax revenues at a higher rate than some of these other sectoral jobs. So if you’re growing your local economy, you want to grow it overall, but you really want to stress certain sectoral jobs over others, if you have your druthers.”

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