Labor Surplus Area

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Labor Surplus Area

Labor surplus areas (LSAs) are government-designated towns and counties that have experienced severe unemployment. These area are designated by the government in a yearly survey. Such a designation is then linked to federal procurement policies aimed at reducing unemployment.

Technically speaking, and as defined by the U.S. Department of Labor (DOL), an area is first defined as a "civil jurisdictions" and such a jurisdiction has a surplus of labor "when its average unemployment rate is at least 20 percent above the average unemployment rate for all states (including the District of Columbia and Puerto Rico) during the previous two calendar years. During periods of high national unemployment, the 20 percent ratio is disregarded and an area is classified as a labor surplus are a if its unemployment rate during the previous two calendar years was 10 percent or more." In turn, for purposes of this definition, "civil jurisdictions" are defined as cities with a population of at least 25,000; all counties also fall under the definition. In four states (Michigan, New Jersey, New York, and Pennsylvania) townships also qualify if they have 25,000 people or more. Finally, in Connecticut, Massachusetts, Puerto Rico, and Rhode Island "towns" are included because counties have little or no governmental functions. DOL points out that data are collected based on the narrower definition of "city" or "town" rather than metropolitan area. This permits more precise targeting of preference. Thus a large metro area with a poor core and rich suburbs would have its inner city designated—not its opulent "burbs."

DOL issues an annual list of such areas; the list is published in the Federal Register. For FY 2006 (the most recent), the period under consideration was January 2003 through December 2004. In that period the national average unemployment rate was 5.8 percent. Jurisdictions with 7 percent unemployment or higher (5.8 times 1.2) therefore qualified.

Two federal executive orders make use of these designations. One is Executive Order 12073, Federal Procurement in Labor Surplus Areas, the second is Executive Order 10582, Implementing the Buy American Act. Both create preferences for employers located in such areas when the employers bid for federal contracts. Typically state governments further publicize the "labor surplus areas designated in their states, alerting employers there to the opportunities now available, minimally for one year, usually for longer periods—because economic conditions in these areas rarely just bounce back.

Other federal programs also use the designation to modify the distribution of their services in such areas. For example, food stamp distribution rules are eased in LSAs so that food stamps are available for longer periods under U.S. Department of Agriculture rules than in other areas.

The term itself predates its use as a governmental designation and meant precisely what the three words signify, but without the official numerical qualifications—namely that an area has more labor, with the implied proviso of "appropriately qualified," than it needs. Another implication of the phrase is that an employer will find it easier and more economical to staff a new operation in such an area than in another one. The wider use of the term has lost its currency in recent decades in part because it has been preempted by government usage. A search of business literature turns up only a few articles—and all of these narrowly focused on the DOL program.

Instead, business usage has evolved in another direction, namely to express (and to complain about) the opposite condition by talking about a "tight labor market," indicating low unemployment in a market with high-skilled employees—and in consequence high salary or wage demands and difficulty staffing. In the modern employment climate, specialization of the workforce, including its educational qualifications and exposure to new technology, has become primary. States and localities, therefore, in pursuing new business, stress an "educated, skilled workforce," not simply the availability of lots of bodies—which the old term still carries as a connotation.