Friday, May 1, 2015

Businesses bail out of low-income neighborhoods

Advocates for the poor complain about the lack of businesses, banks, parks and restaurants in low-income neighborhoods, and they have a reasonable argument. Shopping, cashing checks, routine banking, obtaining food are difficult when the closest facilities are miles away.

But business decisions are made on a rational basis. Businesses locate stores where they can earn a profit. Lower-income neighborhoods are risky because low-income families have less spending power; sales in poorer-neighborhood stores are likely to be lower. Smart management and targeted merchandise can make these stores profitable, however, if other detriments are not present.

Low-income neighborhoods are often also high-crime neighborhoods, and the threat of theft or even arson and looting (of the type seen in Baltimore this week) make some neighborhoods a no-man's land for businesses. A recent Facebook post showed a photo of store shelves with every detergent bottle tagged with a security alarm to prevent shoplifting. On detergent bottles? Yes, even on $5 detergent bottles that are difficult to conceal and not very costly. The tag on the photo was "how to tell if you live in the ghetto."

Shopping in a Charlotte chain drugstore a few years ago, I was shocked to see every shelf locked down with clear plastic flaps. You had to call a clerk to come unlock the shelf in order to get a bottle of aspirin or a tube of toothpaste. Obviously, the store had a serious shoplifting problem.

In Baltimore this week, rioters (not protesters) looted and burned down a CVS pharmacy, which reportedly had been sited in the neighborhood in order to provide the convenience, reasonable pricing and inventory that neighborhood activists had demanded. Also torched was a senior housing facility, another amenity that would make the neighborhood safer and more livable.

Crime, whether the every-day style of shoplifting or the occasional riot, looting and arson turn businesses and jobs away. It may be asking too much to expect under-educated, low-income residents to understand the macro-economic impacts of hopeless loss curtailment and crime prevention, but residents should be able to understand the need to respect other people's property, investments and jobs.

When a neighborhood gets a reputation of being crime-ridden, no one wants to live there. Residents move away. Some move ahead of the curve while others wait too long and are stuck in "upside down" mortgages as property values plummet. Abandoned, boarded-up houses, which attract even more crime, are the result.

It works the same way with businesses. If shoplifting losses exceed sales, the business will close, no matter how badly residents need its services. If insurance costs are untenable because arson is a lingering threat, the business will go elsewhere.

Neighborhood revitalization takes more than rehabbing or building new houses and inducing needed businesses to locate in low-income areas. It requires positive attitudes among the population and respect for property and the rights of others. 

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