Paying Employers to Hire Local Workers in Distressed Places

Many tax incentive zones encourage employers to hire workers in distressed places. A well-developed literature on hiring low-skilled workers has much to say about why such zones have resulted in little employment for nearby residents of distressed areas but has not informed evaluation or policy for zones. Using the Detroit Empowerment Zone experience as a case, this article finds that referrals, usually from employees, determined hiring, resulting in industrial districts with few local workers and retail districts with many more, with workplaces segregated by race and ethnicity. Although skill requirements and screening approaches should not have excluded many qualified local workers, employers in industrial areas had negative stereotypes of workers from nearby neighborhoods. Trusted intermediaries such as community-based organizations may enable tax incentive zones to produce jobs for local workers by breaking down stereotypes and inserting a new “mouth†in the word-of-mouth hiring practices.