Increasing Marginal Revenue Product of Urban Black Men in Public Housing

1. Increasing Marginal Revenue Product of Urban Black Men in Public Housing Arthur Frazier Maxine Goodman Levin College of Urban Affairs Cleveland State University

2. Table of Contents Introduction Public Housing and Urban Spatial Theory The Impact of Gautreaux Human Capital Soft Skills Method Discussion Conclusion

3. Introduction From economic perspective many Black males living in public housing have low productivity and marginal revenue product (MRP) MRP is defined as the amount of revenue a firm generates when it adds one additional unit of input Input can be labor, capital or both A worker is valuable to an employer if MRP exceeds the wage Public housing urban Black male MRP is not very productive

4. Historical Perspective After World War I millions of Blacks came north to look for work Many settled in industrial cities such as Chicago, Detroit, Pittsburgh and Cleveland Several Blacks had difficulty finding suitable housing in northern cities and many were forced to live in urban ghettos

5. During the Great Depression the unemployment rate for Blacks was 30 to 60 percent higher than Whites Congress passed the Fair Labor Standards Act in 1938 establishing the minimum wage However, White employers realized they had to pay Black workers the same wage as White workers for equal work and began firing Black workers As a result, urban Blacks had to accept lower paying menial jobs and became isolated in ghettos

6. Public Housing and Urban Spatial Theory Urban spatial theory-Blacks living in urban areas are isolated from high wage suburban jobs Large pool of workers relative to available jobs The urban spatial mismatch theory assumes that residential location is exogenous. However, other factors i.e. school quality, transportation, safety may also influence location Spatial mismatch alone is not reason for high Black urban male unemployment

7. The Impact of Gautreaux More than 60 percent of public housing is located in central metro areas where there is a large concentration of minorities In suburban areas public housing is less than 20 percent of all units

8. In Gautreaux v. Chicago Housing Authority a federal court ruled that the Chicago Housing Authority and Housing and Urban Development (HUD) discriminated against Black tenants by placing them in large public housing developments in poor neighborhoods The case was settled when HUD agreed to give vouchers to Black tenants which allowed them to move to areas that were less than 30 percent Black

9. After GautreauxHUDbegan to offer more alternatives to Black tenants such as Moving to Opportunity (MTO) Housing Opportunities for People Everywhere (HOPE) IV However, despite more alternatives for tenants and improvements in public housing, the underlying problem of urban Black male unemployment did not improve

10. Human Capital One reason for high urban Black male unemployment is lack of human capital Human capital includes education, experience, and neighborhood quality Classic economic models assume that all workers have the same productive human capital but in reality that is not the case

11. Studies have found that a 25 percent gap in earnings and education of Black men can be accounted for in variation of neighborhood quality Local productivity is a significant contributor to positive neighborhood growth Public schools are very important to neighborhood growth and nurturing productivity at an early age If these schools lack resources to effectively teach, children will not acquire the basic math and reading skills needed to compete in the job market

12. Consequently urban Black males in public housing neighborhoods with underperforming public schools face severe obstacles when trying to acquire human capital needed to improve employment prospects One obstacle is a perception that urban Black men lack soft skills

13. Soft Skills Definition of soft skills is difficult to quantify even though employer surveys indicate it is the most important hiring component for entry level jobs Four workplace competencies have been identified as soft skills: Cognitive skills Oral communications Personal qualities/work ethic Interpersonal/teamwork skills

14. Cognitive skills-difficult to measure because they are often based on mathematical standardized tests such as the Armed Services Qualification Test (AFQT) Include ability to identify problems, evaluate alternative solutions, reaching decisions in a logical manner, and adjusting to unanticipated situations by applying established rules

15. Oral communications-ability to communicate messages appropriate to the audience Also include being able to understand instruction, give direction and verify information Personal qualities/work ethic are skills associated with self-esteem and willingness to work There is debate as to whether this is soft skill per se or a product of soft skills

16. Interpersonal skills include the ability to negotiate, being a team player, participate in group decisions, and be able to resolve conflict When addressing soft skills in the context of employment three common elements emerge: Soft skills relate to interaction between individuals Soft skills are likely to be environmental specific Soft skills are difficult to define

17. Giloth (1990) identifies two paradigms that relate to soft skills, workforce strategies and job training A sector-based paradigm is a belief that development begins where the jobs are and community connections to lower-income job seekers follow This paradigm relies on clusters as a tool for job creation and economic development However, a cluster based approach could be biased against Black males because of the perception that they lack the soft skills needed to attract firms

18. A place-based paradigm focuses on the need of the individual job-seeker and seeks to improve job prospects through community development In terms of raising Black male MRP, this would be the most desired approach because performance criteria common to a sector-based paradigm would not be considered a barrier to employment opportunities

19. Method Research Question: Whether programs addressing soft skills and job training increase employment opportunities Table 1 displays definitions of variables used in factor analysis and logistic regression obtained from the data set Survey of Income Participation (SIPP) 2004 Panel

21. Table 2 describes 13 employment measures that were submitted to an exploratory factor analysis The analysis resulted in five factors with high loadings pertaining to job search and job club programs In addition there were high loadings associated with attendance at a job readiness program and attending classes to improve reading

23. Table 3 displays the results from logistic regression predicting the variable Employment which measures whether a participant held a job during a one month period The final statistics revealed significant contributions of ELKWRK, spent time looking for work, EWELACT1, a measure of class attendance to improve reading and THEARN, a measure of household income A one unit increase in these variables increased the odds of the occurrence of the variable Employment

25. Discussion Urban Black males living in public housing have low MRP As shown in table 3, a one unit increase in public housing (EPUBHSE) reduces the odds of employment by 62 percent One solution to this problem would involve increasing psychological capital

26. Luthans (2012) identifies four components of psychological capital: Self-efficacy –ability to handle unexpected problems Hope-ability to adapt to changes in order to accomplish a goal Optimism- positive mental attitude Resilience-successful response to adversity

27. The findings of this study suggest that positive Black male psychological capital can be developed through job readiness training and other work related activities However, Porter (1995) believes urban entrepreneurs have the capacity to increase Black male MRP by directing their talent from the social sector to the private sector. As a result, inner cities can become export communities and become attractive to clusters

28. Conclusion Black men in public housing face several challenges However, evidence indicates job training and other activities such as attending classes to improve reading and job readiness skills increase the odds of employment. Soft skills, human capital and psychological capital are attributes that can be developed with training Collaborative effort from public and private sectors are needed to improve the MRP of Black males living in public housing

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