Network News

Enterprise zones ignore the importance of social networks.

When GL Transports needed extra drivers for the holiday rush last winter, the company didn't advertise in local newspapers or post signs on telephone polls. Instead, the owner of the West Los Angeles freight business called an old friend, Carlos Augusto. "Sure," said Augusto, when asked if he knew anyone looking for employment. "My youngest boy needs the work. He's a good kid, hard-working. You can rely on me that he'll be on time every day."

This is a social network in action. Although countless such networks operate at every level of the economy, policy makers ignore their importance in the areas where community ties are most needed: the inner cities. A recent study funded by the Russell Sage Foundation and other groups concludes that enterprise zones, which aim to provide jobs in high-poverty districts by offering tax breaks and other incentives to outside businesses that locate there, are poorly conceived because personal networks, rather than physical proximity, determine job placement.

The study's authors, sociologists Philip Kasinitz and Jan Rosenberg, looked at Red Hook, Brooklyn, an area of some 13,000 residents severed from their middle-class neighbors by concrete highways. Half of Red Hook's residents lived below the poverty level in 1989, and three-fourths called a monstrous housing project home. Although Red Hook is not an enterprise zone, it "already has the mix of low-income residents and industrial employers that enterprise zones aim to create," the authors write in their summary of the study in the Autumn 1993 City Journal. Yet even with this seemingly ideal mix of local jobs and potential workers, businesses in Red Hook tend not to hire local residents because they identify job candidates through personal connections. "The primary quality employers look for in an unskilled position is reliability, and most report that the best way to find reliable employees is by personal referral," Kasinitz and Rosenberg write. The owners and top managers of the companies with the most jobs tend not to be ghetto residents themselves. As one employer told the researchers, "We don't tend to just take people off the street, because I've had a lot of bad experiences."

Kasinitz and Rosenberg note that the networks that provide job information are not often found "in the sort of high-crime ghettos that discourage the formation of strong social ties." They argue that, rather than establishing enterprise zones, policy makers should try to foster proxy networks in poor neighborhoods.