Increasing Marginal Revenue
Product of Urban Black Men in
Public Housing
1
ARTHUR FRAZIER
MAXINE GOODMAN LEVIN COLLEGE OF
URBAN AFFAIRS
CLEVELAND STATE UNIVERSITY
Table of Contents
2
 Introduction
 Public Housing and Urban Spatial Theory
 The Impact of Gautreaux
 Human Capital
 Soft Skills
 Method
 Discussion
 Conclusion
Introduction
3
 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
Historical Perspective
4
 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
Public Housing and Urban Spatial Theory
6
 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
The Impact of Gautreaux
7
 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 Gautreaux HUD began to offer more
alternatives to Black tenants such as
1. Moving to Opportunity (MTO)
2. 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
Human Capital
10
 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
Soft Skills
13
 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:
1. Cognitive skills
2. Oral communications
3. Personal qualities/work ethic
4. 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:
1. Soft skills relate to interaction between individuals
2. Soft skills are likely to be environmental specific
3. 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
Method
19
 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
20
Table 1
Employment
EPUBHSE
ELKWRK
EWRKEXP3
EWELACT1
EWELAC21
EWELAC22
EWELAC23
EWELACT3
EWELACT4
Black
ESEX
THEARN
Employment last month
Residence in public housing project
Spent time looking for work
Worked in a work experience
program
Attend classes to improve basic reading
Attend job readiness to learn
Attend job search program or job
club
Attend training to learn a specific job skill
Did ... attend job training
Participate in a work experience
Race
Sex of this person
Total household earned income
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
Table 2
Participate in a work experience
Spent time looking for work
Worked in a work experience program
Attend job search program or job club
Black
Did ... attend job training
Attend classes to improve basic reading
Sex of this person
Attend training to learn a specific job
skill
Residence in public housing project
Attend job readiness to learn
Total household earned income
Employment last month
1
2
0.820 22-0.034
0.681
0.113
0.558
-0.54
0.102
0.872
0.001
0.616
0.131
0.159
-0.159 -0.229
0.353
0.127
0.056
0.216
Factor Loadings
3
4
-0.019
0.037
0.063
0.065
0.393
0.017
0.098
0.142
0.218 -0.021
0.800 -0.045
-0.617
0.328
-0.566 -0.309
-0.203
0.693
5 Communalities
0.23
0.728
-0.002
0.485
-0.052
0.760
0.016
0.801
-0.266
0.498
0.101
0.695
0.154
0.590
0.033
0.558
-0.32
0.674
-0.225
0.265
-0.043
0.341
-0.3
0.162
-0.148
-0.004
0.238
-0.077
-0.12
0.691
0.683
-0.018
0.044
0.234
0.074
0.868
0.754
0.730
0.574
0.784
0.701
Eigenvalue
Percent of Total Variance
Percent of Common Variance
2.210
17.003
26%
1.953
15.022
23%
1.725
13.266
20%
1.542
11.859
18%
1.149
8.840
13%
65.989
100%
KMO measure of sampling adequacy =
Bartlett's Test of Sphericity
n = 124
0.515
Approx. Chi-Square =333.389, df= 78, p<.001
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
24
Discussion
25
 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:
1. Self-efficacy –ability to handle unexpected
problems
2. Hope-ability to adapt to changes in order to
accomplish a goal
3. Optimism- positive mental attitude
4. 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
Conclusion
28
 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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