Debate rages in the District of Columbia over the costs and wisdom of a District-wide paid leave program. The point we make on this issue is employers do not pay payroll taxes. They merely pass them along to employees in the form of lower wages, fewer hours, jobs lost, more expensive health coverage, fewer vacation days, etc. This is widely accepted accounting principle from the Congressional Budget Office on down. See the attached document.
Below are the rules for the types of political activities organizations organized under Chapter 501(c)(4) of the Internal Revenue Act:
Code4Life is an after-school program run by our sister organization, the Economic Growth DC Foundation in partnership with Accenture that teaches middle-school students basic computer programming skills.
We are seeking two paid instructors to teach Code4Life at KIPP NE Academy one day a week for two hours after school for eight weeks, starting on Tuesday, October 4th. The salary is $25 per hour for the total of 16 hours that the program will run this semester.
If you are interested in teaching Code4Life, contact our executive director, Dave Oberting, at firstname.lastname@example.org.
You can learn more about Code4Life here: http://egdcfoundation.org/code-4-life/
Last year, the Seattle city-council voted to raise the minimum wage to $15 per hour over several years. It also mandated the creation of a Seattle Minimum Wage Study Team to analyze the results of the increases on wages, employment and local businesses. The study team recently released a report covering the first year of the implementation, when the minimum wage rose to $11 per hour.
It should be mandatory reading for every District policymaker:
By Dave Oberting
To no one’s surprise, poverty is not spread evenly throughout the District of Columbia. Only six percent of the District’s white residents live in poverty. For Hispanics, the rate is 23% and for African-American District residents it’s 36%.
The most important statistic in all of the poverty debate is this one: according to Dr. Harry Holzer of the McCourt School of Public Policy at Georgetown University, of the 88,773 people over the age of 16 living in poverty in DC in 2014, only 1.9% had the opportunity to hold a full-time job at some point throughout the year, while 64% did not have the opportunity to work at all.
The District doesn’t have a “poverty” problem, per se. It has an unemployment and underemployment problem, of which poverty is a symptom.
The elusive “solution” to poverty is actually pretty obvious: work — meaningful, decent, and full-time work to be sure, but work itself is how poverty ends.
Our public discourse tends to trend towards who’s to blame for the existing state of affairs, but the causes are many, varied and ultimately irrelevant. The only thing that matters is how it gets fixed.
Our answer comes in three parts that are not a mystery:
1) The District’s economy grew at a rate of 1.55% in 2014. While better than the 0.61% contraction that took place in 2013, it’s not fast enough to take on the District’s high level of unemployment. The number one task of the new administration, and the thing that most requires their attention is implementing a policy framework that permits the private sector to grow faster. This can and should be fixed in the short-term. Improvements in tax policy, regulatory policy, more flexible labor laws and even the facilitation of the birth of new industries are within reach. Aggressive moves in each area are required to jump-start the creation of jobs at all skill levels.
2) Too many District residents lack the skills required to acquire and maintain a full-time, middle-skill, middle-wage job. This is a medium-term project, but the best tool we have for transmitting the skills that District residents need to command a middle-class job is our long neglected workforce development system. It is frankly the best anti-poverty tool we have.
Some improvements in the system have been made over the last four years, but we need to move farther, faster. Instead of complaining that the workforce is unskilled, the corporate sector needs to drive the design of, supervise, facilitate, and to some degree, fund an improved job training system. As the pace of job creation increases in the short-term it places a higher premium on residents with competitive skills.
3) As a longer-term proposition, we need a more radical reconstruction of our K-12 education system. Dating back to Mayor Fenty’s takeover of the schools and the tenure of Michelle Rhee, the energy required for dramatic improvement has been there, but the results have not. According to Ken Archer of Greater Greater Washington, if you take a closer look at the city’s test scores, you see, “stagnant or downward trajectory for black, Hispanic, low-income, English language learner, and special education students in the last five years.”
This is a recipe for the perpetuation of inter-generational poverty. Until the city grapples with this reality and commits to more drastic action, the long-term trajectory of poverty will not change. By the time a faster growing economy is producing more jobs,and an improved workforce system is producing higher-skilled District residents, we must graduate 100% of our high school students and they must be ready for post-secondary training/education and a productive career.
They say the definition of insanity is doing the same thing over and over and expecting a different result. We’ve been doing the same things over and over for decades.
Dave Oberting is the executive director at Economic Growth DC, an economic policy organization focused on the District and its economy. You can email Dave at email@example.com.
By Dave Oberting
Here is the proposition that underlies all that we do at Economic Growth DC: the right to a decent full-time job is the most basic and fundamental entitlement of them all. It is the cornerstone of social justice. It is the foundation of human dignity.
We often forget that the full name of Dr. King’s pilgrimage to the nation’s capital in 1963 was the “March on Washington For Jobs and Freedom.” Was it simply a typo that Dr. King put jobs before freedom in the title of his speech, or was it a conscious ranking of his priorities?
What would Dr. King think if he found out that 50 years have passed, and in the city where his march was held, 88,773 people (out of a population of 658,000) over the age of 16 still live in poverty? And how would he feel if he heard that only 1.6% of them had the opportunity to hold a full-time job at some point in the last year.
Every day that goes by that a District resident doesn’t have the opportunity to work full-time is another day that our local government has failed that resident.
For it is the District government that bears responsibility when the economy slows, and job growth sputters. Our elected officials hold the keys to the legal and regulatory structures that permit an economy to function. When that architecture fails, it is not the fault of the man on the corner searching for the means to feed his family.
We’ll work every day, with every tool at our disposal, to bring you a faster growing economy capable of creating a full-time job for every working-age District resident.
We’ll work every day to radically improve our job training system so that it imparts the skills that District residents need to command the high-wage jobs of the next generation.
We’ll work every day to urgently and dramatically improve our K-12 education system so that by graduation every District student can think critically, solve problems, communicate effectively, and collaborate as part of a team.
And we’ll work every day to make sure that every 12th-grader is prepared for a four-year college program, a technical training program, an apprenticeship, or in special cases, a good-paying job in the local economy.
Dave Oberting is the executive director at Economic Growth DC, an economic policy organization focused on the District and its economy. You can email Dave at firstname.lastname@example.org.
When a visitor comes to the District, they look around and see dozens of construction cranes, 300 shiny new restaurants opened in just the last two years and inevitably think the District must be booming.
There are certain segments of the economy that are doing well and affluent residents have benefitted tremendously, but there is another side to the story. For thousands of District residents at the lower end of the education and income distribution, things are not good.
For insight into what’s really going on with the District’s economy, we’ve assembled and analyzed a mountain of economic data. Click below to see the full presentation.
Today we’ve cleaned up a couple of errors. In particular, we under-reported some sales tax data. Sales tax has actually trended positive, so we changed the presentation to reflect that. We also made the job growth data easier to understand.
Check back often for new updates.
“The District’s economy needs to grow at a significantly faster rate in order to create the number and kinds of jobs we’ll need over the next generation. Faster growth is required to increase the incomes of District residents, and we need it to produce the amount of tax revenue we’ll need to do the things the District says it wants to do in areas like affordable housing, homelessness and Medicaid. The research, programs, and initiatives we undertake are short, medium, and long term efforts to facilitate faster economic growth and the job creation that comes with it.” — Dave Oberting, Executive Director
Our current priorities are:
Economic Growth DC
- Regulatory Reform — Reducing the cost and increasing the ease of doing business in the District of Columbia are two of Economic Growth DC’s primary goals. Both the cost and the ease of doing business are products primarily of the regulatory process. Reducing the complexity of our regulatory system and reducing the cost of compliance would provide an immediate boost to economic growth. We will take advantage of every opportunity to move towards a simpler, smarter regulatory architecture.
- Regulatory Review & Amendment Act — This bill, as proposed by Economic Growth DC, would require the District government to calculate and weigh the costs and benefits of all regulations expected to have an economic impact in excess of a certain amount. It will add much needed transparency to the regulatory process as many regulations act as a hidden tax on consumers who ultimately bear the burden of those regulations.
- Tax Reform — A Tax Revision Commission organized by Mayor Vincent Gray and led by former Mayor Anthony Williams conducted a comprehensive review of the District’s tax framework over the past 18 months. They recommended a number of changes to the tax code that were subsequently adopted into legislation championed by Council Chairman Phil Mendelson. The most important of these changes lowered income tax rates on moderate to middle income DC residents. We believe this should be the beginning of the tax revision process, not the end. Our basic tax philosophy is we should incentivize work by lowering the tax on it. We will advocate in the coming year for more progress on our tax code.
- District of Columbia National Disaster Insurance Protection Act — If passed, this federal legislation would empower the District to compete with off-shore jurisdictions to keep insurance company catastrophe reserves in the U.S. by providing tax incentives for such funds to be maintained in the District of Columbia. This legislation would open the door to the creation of thousands of high-paying jobs in the region and billions of dollars in new economic activity.
- Economic Fact Sheet — Many business owners and managers have made it clear to Economic Growth DC that they often feel misunderstood and unappreciated by the DC government and residents alike. We believe this is because the business community at-large has not done a good job of articulating the contribution that it makes to the the well-being of District residents. Economic Growth DC created an economic fact sheet for the District that details the contributions that are made annually by the District’s 21,592 private businesses. Click here to view: DC Economic Fact Sheet
- Economic Impact Analysis — Chairman Phil Mendelson included in the council rules a provision for the conduct of an economic impact analysis on pending legislation. It is to be performed by the Council’s budget office. This is an excellent first step, but this analysis should be codified into law for both legislation and regulations. Having a better understanding of what individual laws and regulations cost the economy in terms of lost economic activity and slower job growth is the foundation of a good legislative and rule making process. We have proposed a Regulatory Review Act that would require the Chief Financial Officer to conduct an economic analysis on any proposed regulation over a certain dollar value that would calculate the cost that a particular regulation would impose on the private economy. It would also allow for a retrospective review and amendment process for older regulations. This law could easily be expanded to include legislation.
- Labor Law Changes — The District’s labor laws contain perverse incentives that encourage District businesses to relocate to the suburbs upon reaching a certain size and a certain number of employees. We’d like to work with the Council to reform our labor law system to make it more competitive with Virginia and other parts of the country. These reforms will be especially important as the technology start-ups the District has invested so much in begin to mature and start hiring serious numbers of people. These changes can be made at very little cost to the District and without sacrificing important employee protections.
- Land Transfers — The District should seek out more opportunities to acquire unproductive federal lands, develop them, and reap the tax benefits of increased economic activity.
- Reforming Telecommunications Regulation — Telcom, IT and the internet industry represent the most dynamic part of our economy, and yet they suffer from some of the most outdated local regulations imaginable. There is more competition in telecommunications than there’s ever been in the District — Verizon, Comcast, Time Warner Cable, Cricket, RCN, AT&T, MagicJack, and Vonage just to name a few — but they are still regulated like a rotary dial monopoly. The Public Service Commission should move to modernize the telecommunications regulatory architecture this year.
- Fostering Micro-Manufacturing — The District has historically been locked out of the manufacturing industry due to high real estate costs and lack of space. There is a new industry taking shape that would allow the District to become a specialty manufacturing center in its own right. Micro-manufacturing, using 3D printers, is the fastest growing form of manufacturing in the country. They are largely small businesses who’ve used this amazing technology to make a wide variety of products. We’d like to propose legislation that would clear out some of the regulatory and zoning barriers that would enable this industry to take root and prosper in the District. 3D printer technicians do not need a college degree and the jobs generally pay $15-20 per hour. We should be moving quickly to establish a legal and a streamlined regulatory framework for fostering the growth of this industry.
- Science and Engineering Campus — The District intends to become the premier technology center on the east coast. If you look at the other tech hotbeds around the country — Silicon Valley, Boston, and Austin — the one thing they all have in common is a massive research institution like Stanford, MIT, and the University of Texas. These institutions produce not just the technology graduates that start companies, but the technology itself that can be commercialized. The City of New York and Cornell University have partnered to build a massive technology campus on Roosevelt Island in NYC. Mayor Michael Bloomberg called it easily the best tool NY will have for accelerating future economic growth. Stanford finished second in the open competition to build the campus on Roosevelt Island. Somewhere in the president’s office at Stanford is a 600 page proposal for a 150-acre, $2 billion campus that would fit perfectly at St. Elizabeth’s. The District government should move heaven and earth to get Stanford to build that campus here.
- Crowdfunding — This technology provides important access to capital for District start-ups and small businesses. The District has proposed rules to govern crowdsourcing transactions. We’ll work to see these rules implemented as quickly as possible.
- Attract Venture Capital Firms — Increasing the amount of venture capital funding that flows into the District is key to our long-term growth. The District is actively fostering early stage technology firms with investments in things like 1776. Our startup community is moving towards a critical mass of invest-able companies, but we won’t attract significantly more venture funding if the people who make those investments are not physically in the District. We’ll be proposing an incentive package to entice the largest venture firms like Kleiner Perkins, Andresssen Horiwitz, Sequoia and Graylock to set up shop in the District proper.
- Anacostia River — We support the efforts of the United for a Healthy Anacostia River Coalition — Lack of development on the banks of the Anacostia is the most visible effect of the deadly chemicals that have been poured into the Anacostia for decades. We consider the cleanup of the Anacostia to be an important economic initiative. We will help the Coalition wherever we can.
Economic Growth DC Foundation
- Code4Life — Is an after-school program created in partnership with technology giant Accenture that teaches DCPS and charter school middle-school students basic computer programming. The program is designed to put District students on a pathway to a high-wage occupation that does not necessarily require a college degree. The program launched successfully at KIPP NE Academy this fall. We are currently planning our expansion to three additional schools in February.
- Re-entry Job Placement Program — The Foundation is working on the development and implementation of an ex-offender job placement program similar to one that was originally developed in Newark, NJ through a partnership between Mayor Corey Boooker and the Manhattan Institute. The Newark program has experienced real success with its rapid attachment to work job placement model designed to get returning citizens into the workforce quickly. They have experienced a much higher employment and retention rate than typical ex-offender efforts, as well as lower rates of recidivism. At his point, it looks like the program will require substantial private funding.
- Decriminalization — The District decriminalized marijuana in 2014. That action should be the beginning of a sustained campaign to reduce the over-criminalization of DC’s civil society. We will advocate for the formation of a commission which will be responsible for making recommendations for the reduction of certain felonies to misdemeanors, and misdemeanors to civil infractions. Over-criminalization is not unique to the District. At the federal level, there are over 3,000 criminal offenses, and over 300,000 regulations that carry criminal penalties. This is a phenomenon at both the local and national levels that should be rolled back.
- Modern Entrepreneurship Program — This program is essentially a venture capital fund for minority micro-entrepreneurs. The twist is experienced business professionals associated with two U.S. AID contractors with considerable development experience overseas will embed with these entrepreneurs for up to a year. The intensive management assistance is designed to lower the risk profile of these investments. This program also requires private funding.
- Leadership Development Training Class — In partnership with the DC Leadership Development Council, the Foundation seeks to launch a high-school level leadership development training class for high-potential students at DCPS high schools. This class is scheduled to begin in the fall of 2014. The Foundation will administer and underwrite the program. The DC Leadership Devel0pment Council will assemble the curriculum and and provide the instructors.
- Job Placement Coordinator Training — The District provides the bulk of its job training and youth development programs through non-profit social service providers. Each of those providers has at least one person that is responsible for placing their program’s graduates into jobs upon completion of that training. The Foundation uses its private sector job placement expertise to offer free instruction to any of these placement coordinators interested in professional development. This training helps placement coordinators become more effective at what they do, thereby increasing the number of people who are placed into jobs at the conclusion of their training.
- Research — We are currently seeking a Director of Education Policy. This individual will be responsible for organizing and analyzing education policy research that is of interest to EGDCF, as well as conducting original research focused on blended learning and improving educational outcomes. If you would be interested in being considered, please forward your resume to email@example.com.
- Apprenticeships — The Foundation is working with several partners, including organized labor, to implement a much broader use of apprenticeships. Germany is an excellent example of how to use apprenticeships aggressively to provide higher levels of skill. Apprenticeships are not just for the construction trades. There are dozens of professions ripe for the use of apprenticeships.
- Office of Military Preparedness — The military is an excellent career opportunity for District youth. We will be encouraging DCPS to open an Office of Military Preparedness to coordinate the efforts of the various junior ROTC programs, as well as with the various military recruiting commands. The military should be given greater access to students and guidance counselors.
For more information on the Foundation’s activities, visit its website at http://egdcfoundation.org.
In this article in the Washington Business Journal, reporter Michael Neibauer writes about an upcoming regulatory change by the District’s Department of the Environment:
The District is proposing to prohibit non-road diesel engines from idling for more than a few minutes at one time, citing the emissions spewed by the equipment and the environmental and health damage those emissions may cause.
No sane person would say no to the idea of helping the environment and public health by decreasing the amount of carbon emissions produced on District construction sites.
But the way DDOE intends to implement this mandate makes no sense. They have proposed a rule that would deny a company the flexibility of keeping a piece of machinery idling for more than three minutes at a time.
This would lead to construction workers stopping what they’re doing every three minutes to rev up a machine, or to constant fines from DDOE investigators. Starting and stopping, whether for an engine or a power plant is less efficient than continuous operation. The lost productivity alone will lead to more emissions, negating the effects of the rule. It might make it worse.
That is the unwise micro-management of a construction site, and it’s a perfect example of the District regulating for process rather than regulating for outcomes. What is the outcome DDOE seeks in this case? They want to reduce carbon emissions, particulate matter and other criteria pollutants in the District by an unspecified amount.
Let’s say it’s 0.007%, just to pick a number out of a hat. Why not tell Clark Construction or Miller & Long that you want them to reduce the carbon emissions on their job site by 0.007% and let them come back to you with a plan for meeting that objective.
That gets you to the right outcome without the heavy hand of government gumming up the works on every construction site in the city.
Outcomes people, outcomes.
In a previous post, Where to Start with Regulatory Reform, we made the case for changing the incentives that govern the way regulators are measured and compensated. Today, we offer a starting point for the District’s regulatory reform efforts:
In a Washington Post article dated July 10th about Aetna’s withdrawal from the DC health insurance exchange, well-respected health policy consultant Bob Laszewski had this to say:
“The District has never been thought of as an attractive market. It’s not a state — it’s one city, one moderate-sized city, and it’s also known for extreme regulation. When you have a small market that gives a lot of regulatory trouble, for insurers, it’s like why bother?”
Aetna said why bother. Who knows how many other organizations have said as much when considering whether to do business in the District over the last decade. Yes, we’re a relatively small market, but we have a high level of disposable income. The profit-making opportunities should outweigh the lack of overall size of the market.
We believe the District government should be making a public and serious effort to make the District a better, easier and less expensive place to do business. The area in which we have the most control over the cost and ease of doing business in DC is our regulatory system. The District government should undertake a highly visible effort to reform the way we regulate almost everything.
Keep in mind, the District’s economy has grown at an average rate of only 1.28% since 2007, and it grew at a rate of 0.47% over the last two years. All of the most important challenges we face — a real unemployment rate in double digits, an increase in extreme poverty, growth in inequality, and a homelessness crisis — can all be traced directly back to slow growth.
How to fix it
Only the deep, structural reform and modernization of the way we regulate will create the framework from which our economy can break loose from the bonds of slow growth and meet the needs of all its citizens.
The work of modernizing the District’s regulatory architecture will be painful and slow. It’s technical in nature and requires the help of subject matter experts in a range of disciplines. It is not glamorous by any means, which is why most politicians don’t like to touch it. But it has to be done, and somebody’s got to do it. It’s time to man the barricades.
One of the keys to any regulatory reform is changing the incentives for regulators. As it stands, a regulator is compensated and measured based on how many rules get written. We’ve got to stop measuring process and start measuring outcomes.
Where to start
We’ve targeted four areas as being particularly ripe for reform:
- Labor Markets — As described in this op-ed in the Washington Business Journal, the District’s labor market has become sclerotic and inflexible. The op-ed calls for the creation of a labor market commission similar in scope to the tax revision commission that recently overhauled the District’s tax system.
- Telecommunications — Telcom companies are heavily regulated by the FCC, including the infamous Title II regulations originally designed for the regulation of the railroads. DC’s local telcom market is as competitive as it’s ever been. The time has come to overhaul the PSC and the way it regulates telecommunications companies that do business in the District.
- Healthcare — If there were a more favorable regulatory climate, the District’s health market is large enough to warrant being here. Simplifying the way we regulate both insurers and healthcare providers will attract more of both.
- Criminal Justice — From decriminalization through sentencing reform, there is strong bipartisan support for the reform of the criminal justice system. Oftentimes you have to dig to find the moral basis for regulatory reform. When it comes to the criminal justice system, it’s there for everyone to see.
Over the next few months, Economic Growth DC will be establishing committees of experts in each of these subject areas who will come together to produce recommendations for reforms. If you are an expert in any of these subject areas and would like to contribute to our efforts, contact us at firstname.lastname@example.org.