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California State University, Los Angeles Executive Summary School of Business and Economics Rebuilding South Central Los Angeles: Myths, Realities, and Opportunities

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California State University, Los Angeles

Executive Summary

School of Business and Economics

Rebuilding South Central Los Angeles:Myths, Realities, and Opportunities

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California State University, Los Angeles

School of Business and Economics

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A research project byTom Larson, Ph.D.Miles Finney, Ph.D.

Executive Summary

REBUILDING

SOUTH CENTRAL

LOS ANGELES:MYTHS, REALITIES,AND OPPORTUNITIES

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FOREWORD

In the aftermath of the “not guilty” verdict in the Rodney King police brutality case, citizens

in Central and South Central Los Angeles launched a protest that led to the looting and

burning of buildings over a four-day period. Lives were torn asunder during the uprising that

began on April 29, 1992, and more than 1,000 commercial buildings were damaged or de-

stroyed. In the fall of 1993, we began a research project to examine rebuilding efforts and to

analyze the Central and South Central economy. We undertook this research and analysis

during a period when many asked, “Is South Central coming back? ... Could South Central

come back?”

In the course of our study, we discovered that a number of popular notions about the

region are nothing but “myths” that need to be refuted. The five common myths are: there is

a self-perpetuating and growing “underclass” in South Central, there is a net exodus of

businesses from the region, businesses are not making a profit, residents are mismatched for

the jobs that are available, and African-Americans are losing jobs to Latinos.

After completing 200 surveys of owners of damaged or destroyed property, we found

that, contrary to most media accounts, most owners want to rebuild. Many owners of com-

pletely demolished property have been thwarted in their efforts because of the difficulty of

obtaining commercial loans.

The myths about South Central have discouraged investment in the region and have

harmed employment growth. The reality is that South Central has a viable economic base

and can support much greater levels of retail investment because of the untapped purchas-

ing power of residents and the availability of jobs.

This report summarizes our research on the status of damaged property and on the

economic base of South Central Los Angeles.1

Tom Larson

Miles Finney

1 The complete report, “Rebuilding South Central Los Angeles: Myths, Realities, and Opportunities,” by Tom Larson andMiles Finney, may be obtained for $10 by writing to the authors at: California State University, Los Angeles, School of Businessand Economics, 5151 State University Drive, Los Angeles, CA 90032-8120. Telephone (213) 343-2938. Fascimile (213) 343-5462.

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Executive Summary

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INTRODUCTION

Between the fall of 1993 andthe summer of 1994, we

conducted surveys of the own-ers of property that was heavilydamaged in the 1992 Los An-geles civil unrest and studiedthe economies of Central LosAngeles (where there was heavydamage) and South Central LosAngeles (where property dam-age was greatest and rebuild-ing progress was slowest).

In the course of document-ing conditions faced by theowners of damaged property inthe central city, we observedthat there were neighborhoodssouth of the Santa Monica Free-way that are routinely shunnedby most Anglo residents of LosAngeles. Yet, few of theseneighborhoods had the appear-ance of inner-city ghettos. EvenSouth Central Los Angeles is acommunity with many well-maintained, single-family de-tached residences. Many areassouth of the Santa Monica free-way that had sustained heavyproperty damage from the civilunrest appeared to be middle-class neighborhoods.

In the course of our study, wewere often surprised by what wefound. Because the mainstreampress portrays South Central asa ghetto with a large and grow-ing underclass, we expectedmore severe conditions than wefound to be present. We foundthat there are many myths aboutthe central parts of Los Ange-les, and we believe that this re-port will help residents re-evalu-ate their community strengthsand will cause nonresidents andinvestors to be more open-minded when they hear storiesabout South Central. Lo

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Rebuilding South Central Los Angeles: Myths, Realities, and Opportunities

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Shortly after the civil un-rest occurred in 1992, theLos Angeles Department ofBuilding and Safety (B&S)identified 1,063 damagedproperties. Of these, 737

were severely damaged.The value of the propertydamage has been esti-mated at $370,000,000.Many properties sus-tained minor damage,

such as brokendoors and win-dows, and werequickly re-paired. We re-stricted our sur-vey to proper-ties that sus-tained consid-erable damage(at least 10 per-cent of theproperty value)and requiredmajor repairsbefore they

I. MAJOR FINDINGS

Survey of Damaged Property (Map 1)

MAP 1 shows the areacovered by our sur-

vey. It includes SouthCentral, Crenshaw, Pico

Union, and parts of downtown.

could be reoccupied.The Department of Building

and Safety did a follow-up sur-vey in October 1993 that re-corded the status of the prop-erties. We used our survey dataand direct observation tosupplement the department’sdata to estimate the followingnumbers:

Damaged PropertyStatus October 1993

Damaged properties ............. 737Status known.......................... 658Rebuilt .................................... 307Cleared .................................. 300Braced* .................................. 20Work not started* .................. 31Total not rebuilt ..................... 351

*Needed constructionBurned out business at Western and Gage.

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Features

Freeways

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L.A. County Border

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MAP 1: CENTRAL LOS ANGELESHeavily Damaged Properties in Central Los Angeles, Fall 1993

Ned Levineand Associates

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Executive Summary

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Map 2 shows all of theproperties that had notbeen rebuilt by October1993. Calculations showthat most (53.3 percent) ofthe properties with knownstatus had no reconstruction

Properties Not Yet Rebuilt (Map 2)multiple businesses. Weestimate that about 1,300businesses have beendisplaced from the 737heavily-damaged propertiesin the city of Los Angeles.

activity by October 1993. Ifthe unknown sites hadsimilar construction activity,we estimate that there wasa total of 393 sites that hadnot been rebuilt. Many ofthese properties housed

Properties Not Rebuilt, By City Council District (Map 3)Most of the property dam-age occurred in South Cen-tral—the area with the leastrebuilding activity. Even be-fore the damage, SouthCentral was known to haverelatively few retail stores.The property damagegreatly reduced the meagercommercial sector in SouthCentral. The 1987 economiccensus showed only 1,300retail stores in South Cen-tral. Our survey suggeststhat several hundred storeswere displaced in SouthCentral, leaving a tiny com-mercial sector after May1992.

The unrebuilt sites areheavily concentrated inthree city council districts:

Unrebuilt SitesDistrict Sites Council Member

8 123 Mark Ridley-Thomas 9 123 Rita Walters 10 53 Nate Holden

The reason that there areso many unrebuilt sites inthese three districts is thatthey initially sustained ahigher proportion of heavydamage and, subse-quently, had less rebuildingactivity.

Destroyed business at 2121 W. Pico.

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MAP 2: PROPERTIES THAT ARE NOT YET REBUILT

Cleared, Braced or Not Started Properties in Central Los Angeles, Fall 1993

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Rebuilding South Central Los Angeles: Myths, Realities, and Opportunities

4

Rebuilt Properties (Map 4)When we looked at the loca-tions of the rebuilt properties,we noticed that the rebuildingactivity was widespread, but the

greatest activity was not inneighborhoods that sustainedthe most damage. We had ex-pected that some neighbor-

hoods would be rebuilt at aslower pace than others, andthis expectation was con-firmed.

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CD 14CD 1

Features

Regions

Freeways

L.A. County Border

! Sites Not Yet Rebuilt

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MAP 3: NOT YET REBUILT PROPERTIES, BY CITY COUNCIL DISTRICT

Cleared, Braced or Not Started Properties in Central Los Angeles, Fall 1993

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MAP 4: REBUILT PROPERTIESCentral Los Angeles, Fall 1993

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Executive Summary

5

Ellipses of Activity (Map 5)

ters of the type of property be-ing examined.

Cleared Sites: The blackcross in the solid ellipse is thecenter of the cleared sites, nearthe intersection of Slauson and

South Vermont Avenues.

Rebuilt Sites: The black “X”in the broken ellipse is the cen-ter of the properties being re-built (about Martin Luther KingBlvd. and Normandie Avenues).

Destroyed business at 6507 S. Western.

To clarify the pattern of rebuild-ing, Ned Levine and Associatesof Los Angeles and Honoluluprovided a unique statisticalprogram to create ellipticalzones. The centers of the el-lipses show the geometric cen-

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Features Ellipse of Cleared Sites

Ellipse of Rebuilt Sites

? Mean Center of Cleared Sites

/ Mean Center of Rebuilt Sites

Freeways

Major Streets

/ Cleared Sites

! Rebuilt Properties

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MAP 5: GEOGRAPHIC CENTERS OF DAMAGED PROPERTYCleared and Rebuilt Sites, Central Los Angeles, Fall 1993

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Rebuilding South Central Los Angeles: Myths, Realities, and Opportunities

6

II. SURVEY OF PROPERTY OWNERS

property found they wereblocked in their efforts to re-build.

We had expected that manyowners would not want to re-build because the area hadchanged. According to newsstories and local experts, thearea was plagued by rising pov-erty and unemployment rates,and had a growing underclass—the area was widely viewed asbeing in economic decline.

Instead, we found that own-ers wanted to rebuild, but werefrustrated in their attempts. Theleading problem was a lack of

money for restoration. Ownershad to rely on their own savingsand help from family membersfor financing. Few received anybank loans (Figure One).

There were other problems,and some owners did want tosell their property. However,they claimed that failure tomake a profit was rarely a con-cern. Their most significant con-cerns were:

Money (finding financing) ..... 36%Safety .................................... 21%Age (many elderly owners) ... 10%Building permits ..................... 7%

After identifying the damagedproperties, we conducted

surveys of 200 property ownersby phone and mail. Our surveysyielded estimates that were verysimilar to the damage estimatesfrom the B&S surveys, but ex-tended our knowledge of prob-lems faced by property owners.

Despite the heavy damage,most owners wanted to rebuild.It is the severity of damage thathas stalled rebuilding efforts.Structures that were not demol-ished were usually repairedquickly. However, most ownersof completely demolished

Reconstruction at 5300 S. Main Street.

Figure One. Survey of Owners of Heavily Damaged PropertyReasons for not beginning restoration

“What would you say is the primary reason you have not begun to restore the property?”

0 %

5 %

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3 %3 %3 %5 %7 %7 %7 %

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3 6 %

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cent

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nses

Money Safety Age Permit Liquor Other Tenant Relocate Sell Unprofitable

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Executive Summary

7

III. OVERVIEW OF SOUTH CENTRAL

Our Expectations

After surveying the owners,we next studied the

economy of the area that hadsuffered the heaviest damage.The center of this area wasSouth Central Los Angeles, butwe also examined the economyof the entire contiguous area ofheavy damage.

When we began our study,we looked for the South Cen-tral that is pictured in the press,but we could not find it. We firstreviewed the opinions of otheracademicians about opportuni-ties in the inner city or ghetto.The universal academic advicewas that the inner city was apoor place to invest because ofhigh costs and low returns.

Local press accounts pro-vided circumstantial support forthis common view. South Cen-tral is frequently portrayed as anarea in economic decline wherejobs and stores had been leav-ing for years. The facts will de-monstrate that the negativeclaims made about the area areunfair and untrue.

As we examine the economyof South Central, we will beginwith the unfounded stereotypesand then try to establish somefacts.

There are a number of as-sumptions about South Centralthat need to be refuted becausethey are myths that are discour-aging investment and prevent-ing economic development.

The Underclass ThesisAfter 30 years of civil rights leg-islation and 20 years of affirma-tive action, African-Americansstill are twice as likely as Anglosto be unemployed, and African-

Americans still earn a fraction asmuch as Anglos. Meanwhile,poverty rates for African-Ameri-can children have increased tre-mendously (today, about half ofall African-American childrenlive in poverty). Some refer toyoung African-American malesas an endangered species.Deindustrialization andsuburbanization are often citedas causes of the growingunderclass in central cities.

By the 1960s, Los Angeleshad become a center for sev-eral major smokestack indus-tries—automobile, steel, andtire. It has often been arguedthat African-Americans andLatinos were particularly af-fected by the shutdown of theseindustries in the 1970s and ’80s.

Bleak Conditions inU.S. Inner CitiesToday, conditions in our innercities are seen as very bleak. Wehave found many specific refer-ences to the economic declineof the African-American com-munity in Los Angeles. This isalso common to the descriptionof African-American communi-ties in Northern and Eastern cit-ies. Although Los Angeles isvery different from Chicago, De-troit, and New York, the African-American community is por-trayed similarly in all of thesemajor cities.

In the last few years, a newpremise has become widely ac-cepted as offering an accuratedescription of conditions in in-ner cities across the country.The intellectual foundations forthis new line of thinking arelargely contained in WilliamJulius Wilson’s book, The Truly

Disadvantaged: The Inner City,The Underclass, and PublicPolicy. Wilson’s analysis of agrowing underclass offers anexplanation about why so manyAfrican-Americans continue tolive in poverty. It focuses on thedevelopment of an almost per-manent underclass in our innercities.

Social and EconomicIsolation of theUnderclassAfrican-Americans who live inour inner cities are seen as so-cially and economically isolatedfrom Anglos—from jobs andfrom mainstream society in gen-eral. High unemployment ratesamong inner-city African-Americans today are seen asthe consequence of cities hav-ing lost manufacturing jobs be-cause of deindustrialization.Educated African-Americanshave moved out of the innercities, leaving a higher concen-tration of less-educated blacksin poor neighborhoods with fewjobs. African-American inner-city neighborhoods are de-scribed as losing population,losing jobs, and becomingpoorer and poorer. The innercities of this country are pic-tured in severe decline.

The growth of this underclassis the growth of a populationthat is removed from both theeconomic and social main-stream. The underclass is saidto have its own culture, one thatencourages dysfunctional be-havior. This story of theunderclass is widely acceptedby the media. It is a story thatis routinely applied to SouthCentral. From reading articles

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Rebuilding South Central Los Angeles: Myths, Realities, and Opportunities

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in the mainstream press, oneforms the opinion that SouthCentral is another dying, impov-erished inner city. It is true thatinner-city poverty rates have in-creased in many cities—but notin all.

L.A. is Not Spared theDescriptionWe searched library data basesto see how often the underclassthesis is applied to Los Ange-les and found hundreds of sto-ries that discuss the underclassin L.A. The principal reason forthe large number of storiesseems to be a widespread viewthat the 1992 civil unrest was arising up of a downtroddenunderclass. South Central hascome to epitomize, for many,the problems of the inner city.The popular images of SouthCentral are of fires and guns.

The underclass thesisstresses job losses, decliningpopulation, rising poverty ratesand economic decline in innercities. We will briefly examinewhether South Central fits

these descriptions.

SOME L.A. FACTS

Population RiseWe don’t know of anyone whois familiar with South Centralwho believes there is a declinein South Central’s population.Population is clearly rising. It istrue that African-Americans aremoving out, but Latinos aremoving in, and the total popu-lation is growing. This is not thecase in Northern and Easterncities, where inner-city popula-tions are declining. It is typicalof cities in the Southwest to ex-perience population increasesin inner city areas.

Poverty in LosAngelesOne finding that surprised usearly in our research is how lowLos Angeles poverty rates com-pare with those of other majorcities that are said to have se-verely distressed inner cities. In1989, the poverty rate in Detroitwas 32.4 percent; the poverty

rate in Los Angeles was only18.9 percent. In many major cit-ies, African-American povertyrates have increased substan-tially—but not in L.A.

One study by professor PaulOng reported that poverty rateshave been rising in Los AngelesCounty (Figure Two). This wastrue for the period 1969 to 1987(which is the period that Ongstudied). Among blacks, povertyrates have changed very little,improving slightly in the 1970sand again between 1987 and1989. Poverty rates of Asiansand Latinos rose between 1969and 1987, but they also im-proved after 1987. The rise inpoverty rates was not great, andpoverty levels in Los Angelesare not high compared withthose in other major cities.

Of the six major cities shownin Figure Three, Los Angeleshas the lowest poverty rate. But,there are other measures ofpoverty that prove that povertyin Los Angeles is different fromthat in other cities.

Figure Two. Poverty Rates by Race: 1969-1989Percent of Persons Below Poverty Level

1965 1969 1979 1987 1989Los Angeles County

Anglo 7.8 7.5 6.9 7.1Black 24.2 23.2 24.5 21.2Latino 16.6 19.2 25.2 22.9Asian 11.2 14.6 14.2 13.2Overall 11.1 13.4 15.6 15.1

California 11.1 11.4 12.3 12.9U.S. 17.3 12.1 11.7 13.4 12.8 Black 47.1* 32.2 30.9 32.6 30.7 Latino NA NA 21.6 28.1 26.2

* Includes “other” race.

Source: Paul Ong, The Widening Divide: Income Inequality and Poverty in Los Angeles, 1989, p. 16.U.S. Census, Current Population Report, Consumer Income, Series P-60.

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Executive Summary

9

Toledo 10Columbus 9San Antonio 9Milwaukee 8Boston 6Phoenix 6Kansas City 5Houston 4Los Angeles 4

Louisville 14New York 14Philadelphia 14Detroit 13St. Louis 13Nashville 12Norfolk 12Tampa 12Jacksonville 11Pittsburgh 10

Figure Five. Retail Sales in South Central Los Angeles

1982 Retail 1987 Retail Employ Firm

ZIP Code Area2 Firms Sales EMP Firms Sales EMP Change Change PCRetail Population

90001 Florence 127 62,849 910 114 79,751 1,597 687 -13 455 51,841 90002 Watts 43 12,142 187 36 31,825 299 112 -7 1,129 40,629 90003 Manchester 167 90,069 1,049 149 83,288 1,225 176 -18 362 53,938 90007 USC Area 183 128,596 1,896 224 192,645 2,583 687 41 210 46,985 90011 141 80,287 950 138 121,268 1,139 189 -3 696 96,074 90018 West Adams 98 56,525 806 97 69,128 679 -127 -1 498 48,267 90037 128 99,464 1,153 132 113,570 1,499 346 4 431 56,922 90044 Athens 161 121,301 1,360 141 130,550 1,525 165 -20 595 83,958 90047 133 91,863 1,476 120 107,871 1,553 77 -13 400 47,975 90059 41 41,552 367 56 64,539 714 347 15 617 34,536 90061 Imp &110 41 34,330 464 52 84,700 1,266 802 11 420 21,856 90062 43 25,884 394 51 37,273 633 239 8 540 27,517

Total 1,306 844,862 11,012 1,310 1,116,408 14,712 3,700 4 466 610,498

The underclass thesisstresses that poverty has be-come more concentrated in in-ner cities as middle-class Afri-can-Americans have moved out

(Figure Four). In Los Angeles,poverty is not highly concen-trated, compared with that ofother cities. Only 4 percent ofLos Angeles census tracts have

high poverty rates–a lower per-centage than any other majorcity except Houston. Houstonis another city with a growingcentral city.

Figure Four. Percentage of Census Tracts with 40% Poverty Rate, 1980, CitiesNewark 38Atlanta 30Memphis 22Cleveland 20Cincinnati 18Baltimore 17New Orleans 17Chicago 15Birmingham 14Buffalo 14

Figure Three. Poverty Rates in Major U.S. Cities, 1989Percent of Persons in Poverty

Detroit 32.4Chicago 21.6Houston 20.7Philadelphia 20.3New York 19.3Los Angeles 18.9

Source: Statistical Abstract of the United States, 1993.

Source: Richard Greene, “Poverty Concentration Measures and the Urban Underclass,” Economic Geography, July,1991.

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Youth EmploymentThe lack of retail stores offersan explanation for the very lowrates of employment amongteenagers in South Central (Fig-ure Six). Therefore, both Latinoand African-American youth areless likely to work if they live inSouth Central. African-Ameri-

can and Latino youth who livein the San Fernando Valley orthe Westside (areas with largerretail sectors) have employmentrates that compare with thoseof Anglo youth.

Other researchers have notobserved this relationship be-

tween joblessness among teen-agers and residential location.It may be unique to Los Ange-les or a result of our methodol-ogy (we used Public UseMicrodata Area [PUMA] fromthe 1990 census to defineneighborhoods).

Figure Six. Los Angeles Teenage Employment Rates, 1990By Public Use Microdata Area (PUMA)

AREA PUMA Employment RatesBlack Latino Asian White

County Average 23.1 37.3 26.3 44.0Florence/H. Park 5600 10.84 28.24 36.73 NALynwood/S. Gate 5700 19.93 27.44 20.80 23.17Pomona 5900 35.01 35.79 29.87 32.60Carson 6000 35.11 41.93 24.87 43.26Santa Clarita 6402 36.72 47.89 17.78 55.01Compton 6407 19.08 27.23 10.98 30.93Downey 6417 31.47 40.86 29.70 49.16Santa Monica/Malibu 6423 41.91 42.63 34.64 40.79South Central, East 6503 13.40 30.49 38.68 NASouth Central, West 6505 23.17 28.36 NA 43.59Hollywood 6507 22.76 35.44 18.54 27.30Downtown 6508 54.25 35.73 18.29 49.10North Hollywood 6510 25.30 47.14 47.92 40.08East S.F. Valley 6513 54.83 43.99 18.67 50.96NW S.F. Valley 6517 49.90 55.98 33.28 51.00West Los Angeles 6519 43.75 54.85 35.05 32.10San Pedro 6521 19.20 36.67 33.56 43.24Long Beach 6600 20.12 43.02 29.36 39.53

NA = not available; sample size too small to estimate.Data are for selected neighborhoods; see Larson, Tom, “Residential Location and and Black Youth Employment,”Journal of California Politics and Policy, forthcoming, for rates for 58 areas of Los Angeles.Source: U.S.Census, 1990, Public Use Microdata Survey (PUMS).

cline in South Central beforethe civil unrest. The Los Ange-les Times published storiesabout the lack of stores in SouthCentral, and our data confirmsits claim. However, we found noevidence of a net exit of stores(before May 1992). Between1982 and 1987, there was a

small increase in the number ofretail stores in South Centraland a large increase in the num-ber of employees in thosestores.

The per-capita counts of re-tail stores are low in South Cen-tral:

Retail StoresOne indicator of ghetto condi-tions is the meager commercialdevelopment in South Central.It is clear that South Centrallacked retail stores even beforemany were destroyed in 1992(Figure Five). However, there isno evidence of commercial de-

Retail Stores Per Capita

South Central ................. 466 residents per storeWatts ............................. 1,129 residents per storeL.A. County ..................... 196 residents per store

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IV. ECONOMIC BASE OF HEAVY PROPERTY DAMAGE AREA

In the previous section, welooked at retail jobs in South

Central. Here we will examineall jobs and employment in thezone of civil unrest and discussthe entire zone’s economicbase.

This zone includes SouthCentral, but also includes partof downtown and extends westand south. This area is very simi-lar to the area that Rebuild LA(RLA) has designated as a ne-glected area (RLA’s neglectedarea also includes territory out-side the City of Los Angeles).We obtained census tract dataabout jobs in the area, employ-ment of residents, and industrywages.

AggregateEmploymentJob data is based on Dun andBradstreet and American Busi-ness Information data for indi-vidual firms. The 1993 data hasbeen adjusted by the SouthernCalifornia Association of Gov-ernments (SCAG) which pro-vided the data.

In discussing the economicbase, we refer to that part ofcentral Los Angeles that hasheavily damaged properties.Any census tract without dam-age is excluded.

We calculated the number ofjobs per capita and foundslightly fewer jobs per capita inthe civil unrest zone than in thecounty as a whole:

Unrest Zone ..... .48 jobs per capitaCounty ............. .52 jobs per capita

When we counted the num-ber of jobs in the area, we foundmore jobs than employed resi-

dents: 316,979 jobs vs. 221,650employed residents. This meansthat at least 95,000 local jobsare held by nonresidents.

Manufacturing JobsWe next looked at the manufac-turing jobs located in the civilunrest zone. There are manymanufacturing jobs in centralLos Angeles. Ten percent of thecounty’s manufacturing jobs arelocated in an area that contains7.4 percent of its populationand 6.9 percent its jobs. Thereare 87,000 manufacturingjobs—a large percentage(36,000) are in textiles and ap-parel. They pay an average of$7.87 per hour.

Other major industries arefood processing and furniture.Los Angeles has the largesthousehold furniture manufac-turing complex outside NorthCarolina. There are about22,000 jobs in the furniture in-dustry in the county; more than6,000 are in the civil unrestzone. The manufacturing jobs inthe zone tend to be low wagejobs. Wages for productionworkers range from the mini-mum wage to $10–$12 dollarsper hour.

We had read numerous sto-ries that claimed that the manu-facturing base had eroded, andwe were surprised to find somany manufacturing jobs.

Employment of theResidentsWe also examined Census ofthe Population data to identifythe employment of residents byindustry. The residents havelarge shares of jobs in textiles,apparel, food processing, furni-

ture, and other low-wagemanufacturing employment.They have small shares of em-ployment in high-wage manu-facturing (computers and aero-space) and small shares in fi-nance, insurance, and real es-tate.

African-Americans hold asmall share, and Latinos hold alarge share, of the manufactur-

Rebuilt Strip Mall, 5201-5231 South Figueroa.

ing jobs that are available in thearea. In general, the residentsseemed well qualified to holdthe kind of jobs that are avail-able in the civil unrest zone.

Jobs and EmploymentNow we will compare the avail-ability of major categories ofjobs in central Los Angeles withthe type of employment of arearesidents.

There are 87,000 manufac-turing jobs, and residents hold56,000 of them. Therefore, non-residents hold many of themanufacturing jobs. There are9,000 construction jobs, ofwhich residents hold 13,000 (soresidents must commute out-side the area for many construc-tion jobs). There are 37,000wholesale trade jobs, but only9,000 of them are held by resi-dents. There are 45,000 retailtrade jobs, but residents have

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only 30,000 of them.The data show that there are

many jobs in the area, but manyare not held by residents. Rela-tively low education levels mayexplain why residents are lesslikely to hold skilled jobs. How-ever, even low-skilled jobs areheld by nonresidents.

It is commonly believed thatSouth Central residents are un-employed because they haveno access to jobs. Data showthat jobs are available in Cen-tral Los Angeles. That African-American residents have highunemployment rates is surpris-ing because of the availabilityof jobs of various skill levels nearAfrican-American residentialcenters. Latino residents tend tohave higher employment ratesthan African-Americans, butfamily income is lower primarilybecause of low wages. Povertyamong African-Americans in theregion is largely a result of un-

employment, and povertyamong Latinos is often a resultof low wages. We believe thehigh unemployment rateamong adult African-Americansis the result of both discrimina-tion and low levels of educationand training.

Black and LatinoUnemployment Rates

in 1990Black Latino

L.A. County 12.0% 10.1L.A. City 13.5 11.0Compton 15.2 13.3Florence 18.5 16.1

Retail in Central L.A.We probed to determine ifthere was evidence of decliningjob opportunities over time inthe larger area of Central LosAngeles. We obtained datafrom the economic census onjobs for 1982 and 1987. Data

were available by ZIP codes forretail and service jobs. We com-pared retail jobs between 1982and 1987.

We found strong growth inretail jobs—there were about25 percent more retail jobs in1987 than in 1982. This showsthat the overall area of heavydamage has not been losingretail jobs. For the county, re-tail employment grew by only20 percent!

We have no comparison formanufacturing jobs. However,we have found little vacant landin areas zoned for industry, andthere are few empty industrialbuildings available for newmanufacturing. This is simplynot an area that is losing its jobbase. In fact, according to RLACEO Linda Griego, it is difficultfor factories to expand becauseof the shortage of large parcelsof industrial zoned land.

V. FIVE MYTHS

Before we began our study,we expected to find among

the serious problems of Centraland South Central Los Angeles:

a growing and belligerentunderclass, a mass exodus ofbusinesses, high unemploy-ment as the result of fewer jobs

and a skill mismatch betweenresidents and local jobs, and agrowing conflict between Afri-can-Americans and Latinos overthe few remaining jobs. Instead,we found:

• Underclass: The underclassthesis does not apply to LosAngeles. We found no evi-dence that Los Angeles has alarge and growing underclass.We found neighborhoods withmany working class families andfar fewer poor people than weexpected. Poverty rates are notespecially high compared withthose of other major cities.Among African-Americans, thepoverty rate is well below thenational average and, unlike thenational average, it declinedThe new R Ranch Market at the corner of Hooper and Firestone Streets opened March 31, 1995.

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between 1987 and 1989.Among major cities in general,Los Angeles has both a lowoverall poverty rate and a lowconcentration of poverty.

• Profits: Businesses in SouthCentral are making money.Many investors believe thatSouth Central is a poor area inwhich to invest, but those whohave stores are making a profit.In fact, there appears to beweak competition, thus provid-ing opportunities to, frankly,charge higher prices and earnabove-average profits. We be-lieve that in a nondiscriminatoryinvestment market, there wouldbe more retail stores in African-American and Latino neighbor-hoods than is presently thecase.

• Business Exodus: Examin-ing both Central L.A. and SouthCentral L.A., we found a strongbase of manufacturing and ser-vice jobs. Although there arefew retail stores in South Cen-tral, the retail sector was grow-ing before 1992.

• Jobs: Residents are notmismatched for the jobs thatare available in the region. It isoften reported that South Cen-

tral residents are jobless or im-poverished because the manu-facturing base moved out. Thefact is that there are manymanufacturing jobs in and nearSouth Central. A new set ofjobs has replaced the jobs thatdisappeared. The jobs that leftwere often held by Anglos, notby residents. It is true that manyof the manufacturing jobs inand near South Central tend tobe low-wage jobs, such as thosein the apparel and furniture in-dustries, but there are manyjobs that pay well above theminimum wage.

• African-Americans Vs.Latinos: It is true that a highpercentage of jobs in manufac-turing are held by Latinos, manyof whom are recent immigrants.But, African-Americans have al-ways had a small share of manu-facturing jobs in Los Angeles.In the 1980s, African-Americanswere making progress towardbetter-paying jobs, while immi-grants were taking low-wageand low-skill jobs. African-Americans hold jobs that paybetter, on average, than jobsheld by Latinos, have suc-ceeded in gaining many gov-ernment jobs, and have in-

creased their share of profes-sional jobs.

Looking for evidence of jobcompetition for low-wage jobs,we examined teenage employ-ment and were unable to findstatistical evidence that teen-age Latinos are competing withteenage African-Americans. Inneighborhoods in South Cen-tral where there are about equalnumbers of Latino and African-American teenagers, blackteenagers are just as likely asLatino teenagers to hold retailjobs. The presence of moreLatinos in a neighborhood doesnot appear to affect the likeli-hood of black teenage employ-ment.

In general, African-Ameri-cans in Los Angeles seem to bedoing well compared with Afri-can-Americans in other parts ofthe country. Earnings are higher,poverty rates are lower, andthere are higher rates of self-employment and home owner-ship. Although African-Ameri-cans remain far behind Anglosin terms of equality, we haveseen at least some improve-ment in their economic well-being, rather than a worsen-ing—as is commonly portrayed.

Destroyed business at 6220 S. Western.

Officials including RLA CEO Linda Griego (second from left) and SupervisorYvonne Brathwaite Burke (third from left) celebrate the opening of the new RRanch Market at the corner of Hooper and Firestone Streets.

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The findings of this reportsupport a new view that

South Central has a viable eco-nomic base and that the areacan support much greater lev-els of retail investment becauseof untapped purchasing powerand the availability of jobs. Webelieve that commercial devel-opment would greatly enhancethe quality of life and help re-duce youth unemployment inSouth Central.

The problems faced bySouth Central residents arelargely caused by discrimina-tion and below-average educa-tional achievement. We seeSouth Central as an area of lowincome and working families,but not, overall, as an area ofextreme poverty or social pa-thology. The African-Americanneighborhoods west of SouthCentral are also underserved byretail stores, but they are clearlysound neighborhoods withmany affluent families. In Cen-tral Los Angeles, race, notprofit, is determining the levelof business investment.

Market PotentialThere is market potential thatshould attract private invest-ment in retail stores. There is aneed to advertise the fact thatbusinesses are making moneyin South Central. Any one whowants to invest in a store shouldbe welcome.

Development of South Cen-tral Los Angeles will be aidedby the establishment of moreAfrican-American- and Latino-owned firms. This will increasethe South Central economicmultiplier. Programs designedto assist African-American andLatino entrepreneurs areneeded, and financial red-liningmust be monitored and discour-aged. Nonresident ownershipof local businesses prevents lo-cal income from staying in thecommunity and strengtheningthe economy. However, be-cause many more stores areneeded, non-African-Americanand non-Latino ownershipshould not be discouraged.

City AssistanceThe City of Los Angeles canhelp minority business enter-prises become established byreinstating a minority set-asideprogram and monitoring andsupervising recipients of citycontracts.

Government agencies andprivate foundations should beencouraged to promote andsponsor development in SouthCentral.

The EducationImperativeEducational levels in SouthCentral are too low for many ofthe jobs being developed in theCalifornia economy. Young Af-rican-Americans and Latinosmust receive better education,graduate from high school, andbe encouraged to attend andcomplete college.

Latino youth are especiallyhurt by dropping out of highschool, and more African-American and Latino youthneed to attend college. Despite

Demolished business at 5800 S. Broadway.

VI. RECOMMENDATIONS

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discrimination, both African-American and Latino youth ben-efit greatly from educationwhich must be clearly identifiedas a route to economic success.More funding for subsidies and

scholarships for education fordisadvantaged youth areneeded.

Discrimination PersistsAdditional paths must be

found to combat employmentdiscrimination which remains aprimary reason that youngblacks are unemployed. Theemployment rate for urban Af-rican-American teenagers isabout 25 percent. This rate isso low that it cannot be ex-plained by productivity charac-teristics of the youth them-selves.

InvestmentOpportunities

African-American and Latinoresidents lack the fiscal assetsneeded to finance adequate lev-els of business investment in thearea. There is a need to estab-

lish large chain stores and en-courage more African-Americanand Latino entrepreneurs to startbusinesses. Seed money isneeded from the private sec-tor—but not charity. Business

Destroyed business at 6130 S. Western.

Inside the new R Ranch Market at Hooper and Firestone Streets.

of Los Angeles should be con-ducted to shed more light onbarriers to minority enterpriseand to develop incentives toencourage majority-ownedfirms to invest in South Central.We believe that marketing stud-ies will reveal numerous invest-ment opportunities in SouthCentral that will be attractive toinvestors. An expanding popu-lation with substantial purchas-ing power should stimulatecommercial development.

The almost 400 propertiesthat remain unrebuilt are agood place to target develop-ment because these propertiesappear to have housed viablebusinesses before the 1992 civilunrest.

schools in local universitiesshould assist in increasing minor-ity firm development.

Further study of South Cen-tral and other low-income areas

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EditorTom H. Woods

Associate EditorLinda Trevillian

Editorial ReviewEduardo OchoaAssociate DeanDirector, Bureau of Business and Economic Research

MapsNed Levine and AssociatesLos Angeles, Honolulu

Typesetting and DesignLac Rios

PhotographyHyungwon Kang, Jim Mendenhal—Los Angeles TimesRLA

© School of Business and Economics • California State University, Los Angeles5151 State University Drive • Los Angeles, CA 90032-8120