Small cities face big economic challenges

In the shadow of Mount Greylock, high in the rolling Berkshires, Pittsfield opens the commercial gateway to western Massachusetts. . . . Today the city has a prosperous, tranquil look of general comfort and cultivation. . . . The homes of the well-to-do line its elm-shaded streets with substantial dignified residences and smooth lawns. . . . Pittsfield began to change from a quiet self-insulated community to a unit integrated with the outer world and seething with business.

WPA Guide to Massachusetts, 1937

Had you told the people of 1930s Pittsfield that most of the city’s thriving factories would be abandoned before the turn of the century, they would have found it hard to believe. After all, this was a city where, at its peak, General Electric provided jobs to 13,000 workers. Today only about 800 people work for GE there. Like many of the state’s smaller cities, Pittsfield stumbled as it tried to make the transition from traditional industry to the global economy, and fell behind.

Today the US economy is stronger than it has been in decades and, unlike previous periods of economic expansion, the boom is reaching almost every region of the country. But many communities have yet to benefit from the nation’s good fortune. Among those left behind are many of our smaller cities. This trend has troubling implications for Massachusetts and the rest of New England, where most cities have fewer than 100,000 residents and only one–Boston–has a population that exceeds 200,000.

When poverty is a small-city phenomenon it is not confined to particular neighborhoods but affects the entire city. Smaller places that are poor places have fewer assets to bring to bear on issues of economic development. Yet, despite these challenges, small cities around the country have found ways to overcome the innate disadvantages of size and economic isolation and lay the groundwork for revival. Cities like Lawrence, Holyoke, New Bedford, and Fitchburg also have unique strengths as well as liabilities, and there is a real opportunity to exploit them if federal, state, and local policymakers take on the challenge. There is no excuse not to.

The Poverty of Small Places

In Massachusetts, as in New England as a whole, economic problems are concentrated in the smaller cities outside the Boston orbit. Many of these small urban areas lag far behind the rest of the state. In 1999, when the average unemployment rate in Massachusetts was 3.2 percent and in the city of Boston 3.3 percent, the unemployment rate in non-suburban cities ranged from 3.7 percent in Worcester to 8.1 percent in Lawrence. Even last year, when unemployment dipped to 2.3 percent statewide, unemployment was 5.5 percent in New Bedford, 5.3 percent in Lawrence, and 4.1 percent in Fall River.

A similar trend has emerged in job growth. While the state had about 10 percent more jobs in 1999 than it did in 1985, most of the state’s smaller urban centers have lost jobs. New Bedford, Lawrence, Lowell, Fall River, Brockton, Fitchburg, Gloucester, and Pittsfield all had fewer jobs in 1999 than they did in 1985.

Smaller cities are becoming the tenements of the state.

Poverty statistics are even more revealing. Thirty percent of the state’s urban poor live in cities of 150,000 people or less. In 1995, the last year for which we have reliable poverty data, five Massachusetts cities had poverty rates that exceeded the national average by 50 percent or more. While nationally the percentage of those living below the official poverty level stood at about 13 percent, in Lawrence more than 30 percent of the population was poor; in Holyoke, about 29 percent; in Lowell, 23 percent; in Springfield, 22 percent; and in New Bedford, 20 percent.

In fact, smaller cities are becoming the “tenements” of the state, providing cheap housing to the new immigrants who are unemployed or subsisting on low-wage jobs. Hispanics and other minorities make up a large percentage of the poor. In Holyoke, for example, more than 59 percent of the Hispanic community live below the poverty line–compared to about 14 percent of non-Hispanic whites–and close to 80 percent of Hispanic children live in poverty.

New Economy, New Challenges

Most of these places weren’t always poor, though some have always been largely immigrant communities. Most have a rich industrial history. Many in their economic heyday were their region’s center for retail, banking, and manufacturing. At one time, their banks were locally owned and their retail centers vibrant. Industrial leaders contributed both time and money to building libraries, developing parks, and adorning public buildings with works of art. But these also tended to be the types of communities in which the economic fortune–and future–of generations was determined by the economic health and strategic decisions of a handful of employers.

For most of the state’s poorer small cities, the current problem of economic decline is rooted in a much earlier wave of deindustrialization. Today, however, these places are also struggling with the transition to the so-called New Economy. Their problems include an outmoded physical infrastructure; dependence on traditional industry; difficulty in attracting and retaining skilled workers; limited public, philanthropic, and private-sector resources; and a weakened civic capacity.

Most of Massachusetts’s struggling cities were built in the 19th century, when transportation and communication infrastructures were dramatically different from today’s. Then, competitive advantage flowed to places located on rivers and near railroad lines, resulting in dense concentrations of factories and warehouses. The presence of the Merrimack River, for example, led to the birth of Lawrence and Lowell. New Bedford, Fall River, and Gloucester developed because of their ports.

By the late 1950s, however, the interstate highway system had become sufficiently extensive that trucks began to replace ships and railroads, giving industry a broad new range of places to locate. Today, Lawrence houses little new growth but is surrounded by thriving industrial office parks in neighboring communities.

New production and storage methods also made densely built environments less and less desirable. Worse, the earlier industrial development often left a legacy of environmental contamination. Legislation designed to clean up the damage further raised the costs associated with locating in old cities. Given these problems, small cities rarely have the tracts of land appropriate for modern industrial parks–or the water and sewer systems to support them–that are frequently found in large cities.

Perhaps more important, they are also finding themselves on the wrong side of the so-called “digital divide.” Until wireless technology is considerably improved, the high-speed Internet access on which more and more business depends relies on physical wires connecting computers to the national telecommunications network. While in the past this network was largely public, today high-speed telecommunications lines are owned by an array of lightly regulated private companies. They have little economic incentive to invest in places that lack a dense customer base. For much the same reason, access to air transportation presents a problem for small cities, which are distant from international airports.

Almost universally, poorer small cities in Massachusetts have been overly reliant on manufacturing (see table). As that sector has steadily declined, so have the cities’ fortunes, as little or nothing has taken its place. Fitchburg is a case in point. In 1966, Fitchburg boasted 10,000 manufacturing jobs; by 1996, only 3,600 remained, and that was before General Electric closed its facility there in 1999. Traditional industry fled the larger cities as well, but new jobs were eventually created in the burgeoning services sector to replace them.

A new generation of workers has also fled these cities. Following high school, many young people leave for college or jobs elsewhere and never return. This youth “brain drain” is emblematic of the difficulty many of these cities face attracting new residents, particularly skilled workers. In an economy in which a skilled work force is an area’s most important competitive asset, this is a major problem. The work force that is left is disproportionately made up of new immigrants and minorities, who may be eager to get ahead but face language, skill, and other barriers in the labor market.

Most US cities experienced deterioration in their downtowns beginning in the 1950s and 1960s, and this state’s small cities have been no exception. The loss of their traditional markets and the inability to compete with large, national chains has forced many downtown retailers out of business and left main streets with vacant and neglected properties, crumbling infrastructure, and increasing crime rates. With the attendant loss of commercial tax base, communities are unable to make the investments needed to retain and attract new businesses. Meanwhile, surrounding suburban communities are flush with retail activity and tax revenues.

Limited access to key public and private resources further harms small cities and, in a vicious cycle, restricts their ability to compete for those very resources. Because smaller towns have fewer nonprofit organizations and their economic development institutions have smaller staffs, they are at a disadvantage in competition for public and philanthropic funds. Plus, few foundations or public policy initiatives focus on smaller cities.

The restructuring of the financial industry may also have a negative impact on small cities. Financing decisions by loan officers and bank managers that in the past were made locally are now often decided outside of the region. Similarly, small cities have less access to sources of risk capital, whether from venture firms or wealthy individual investors.

Small cities also face special challenges in building and maintaining their civic infrastructure, which provides the crucial collective voice and vision for a community. Elected officials, corporate leaders, chambers of commerce, human-service agencies, community-based organizations, formal and informal civic groups, and work force and economic-development institutions all play a vital role in community development. But in small cities, in particular, the ranks of these vital actors have dwindled. Twenty years ago, the civic leaders of most small cities were owners of banks and manufacturing firms and retail stores. Today, most of the major banks and employers are no longer locally owned–and the small business owners who remain lack the time and resources to devote to civic activity. In addition, public and nonprofit institutions are far less numerous, less well staffed, and less well funded than in big cities. As a result, the civic infrastructures of these places are stretched extremely thin.

Rebuilding the Mini-Metropolis

Our small struggling cities may be down, but they’re definitely not out. In fact, many of their challenges hide opportunities, particularly now, when the most serious threat to the booming New England economy is the shortage of skilled labor. So what is to be done?

  • Build serious and sustained civic partnerships: Without a doubt, the first and most essential step is the creation of a serious, long-term partnership between each city’s key stakeholders–business, labor, community-based organizations, and city hall. This includes a commitment of time, resources, and political capital. Lancaster, Pa., and Green Bay, Wis., offer instructive lessons. Both of these small cities have maintained a strong and diverse economic base. In each case, civic partnerships were important to their success. In Lancaster, for example, entrepreneurial city leaders have worked closely with the corporate sector. Together they built two effective collaborative organizations, the Lancaster Alliance and the Economic Development Action Group, which have mobilized businesses and residents to work on a range of community-building activities.
  • Forge real regional cooperation: Alliances need to extend beyond city borders, as well. The economies of small cities are usually inextricably linked to the regional economy around them. Therefore policymakers need to consider how states (and/or the federal government) can create incentives for various forms of regional planning and cooperation. And municipalities need to investigate what they can do to facilitate joint planning and problem solving with their neighbors. The Augusta/Waterville area of Maine provides a good model. Several small cities there are developing a regional “Smart Park,” an industrial park for which they share both costs and benefits through an innovative tax-sharing arrangement involving more than 25 municipalities. The state of Maine has played a crucial role by offering an incentive to municipalities that join together to promote regional economic development. The Kennebec Regional Development Authority is acting as the developer. Property taxes generated by the site are to be distributed to the member municipalities that participate in the development costs.
  • Take advantage of all available assets: Cities also need to take stock of their existing resources and use them effectively. These include public funding streams, as well as institutional assets such as colleges and universities, community organizations, and so on.
  • Build local capacity: A common trend in smaller cities is not just the loss of manufacturing jobs, but also the loss of traditional civic leadership. The owners of those manufacturing plants and boarded-up downtown stores are gone, bank headquarters have become ATMs, and tight municipal budgets make it difficult to attract talented administrators. As such, many small cities need to rebuild their base of civic leaders–to call into action a new generation of community residents and business leaders who are willing to make a long-term commitment to strong civic institutions and community realization. The new immigrant populations offer real hope in this regard. To support this effort, foundations, public interest groups, and state government should consider making greater investments in leadership development programs and civic capacity-building initiatives.
  • Invest in physical infrastructure: Policymakers at the federal, state, and local levels need to look seriously at what they can do to begin to build, rebuild, and retrofit the physical infrastructure of small cities. As part of that investment, they must ensure that cities have access to the critical new telecommunications technologies.
  • Create and enhance local amenities: Similarly, both states and the cities themselves should take a hard look at how they can make these places more livable through investments in various amenities, such as sports, recreation, nature, arts, and culture. Scranton, Pa., is an example of a small city with an aggressive program to promote arts and cultural development as part of its economic revitalization strategy. The city renovated an old Masonic temple and established the Scranton Cultural Center that houses the Northeastern Philharmonic, the Broadway Theater League, and other performances and concerts. Other cities have focused on their natural amenities. For example, in both Wasau, Wis., and Pueblo, Colo., creation of a river walk and other recreational amenities have contributed to improved downtowns.
  • Transform diversity into strength: Immigrants bring with them new energy and can be a critical asset for economic development. Public policy should provide incentives for their entrepreneurship, home ownership, and civic and cultural involvement. When Fitchburg recognized that its growing immigrant and minority population was not participating in the city’s civic and economic life, the city developed “study circles” to help them achieve a greater sense of community integration. These study circles involve a diverse set of Fitchburg residents to create an economic and social environment where minority and non-minority residents are working cooperatively to address the many serious issues facing the city.

An Historic Opportunity

Meet the Author
Meet the Author
Meet the Author
Today, three trends converge to offer New England an historic opportunity. First, labor markets have never been tighter. That makes the influx of new immigrants a godsend for our labor-hungry industries. In Massachusetts, over the past decade, what little growth there has been in the labor force is due to immigration. Second, our smaller cities have provided affordable housing for this new labor force. Third, the entrepreneurship of these newcomers is offering old towns a new lease on life.

It may take a little imagination and investment, but we can ensure continued economic prosperity in the state, extend that prosperity to many small, formerly industrial cities that launched our region economically and politically, and offer the American dream to a whole new generation of immigrants who want only what previous generations of immigrants have wanted‹the rewards of hard work. In the past, all that took was sweat equity. In a complex, globalized information economy, social equity is required, as well.

Beth Siegel is president of Mt. Auburn Associates, an economic development consulting firm in Somerville. Barbara Baran and Suzanne Teegarden are senior partners of Workforce Learning Strategies, a national work force development consulting firm. Research for this article was supported by a grant from the Economic Development Administration of the US Department of Commerce.