In a city where nearly one in three residents is poor, yesterday Mayor Michael Nutter set in motion two new initiatives aimed at the seemingly intractable problems of poverty and unemployment. In an expansion and refocusing of the Mayor’s Office of Community Service, he named Planning Commission chair and longtime advocate of the poor Eva Gladstein to oversee what will be called the Mayor’s Office of Community Empowerment and Opportunity. The idea is similar to that behind the Empowerment Zone program, which Gladstein headed up locally: coordinate funding streams, economic development initiatives, and social services to maximize the benefits for the people who need it most.
“When we look at anti-poverty policies, one of the long-standing challenges is coordination,” says Guian McKee, a professor of public policy at the University of Virginia and the author of the 2008 book The Problem of Jobs: Liberalism, Race, and Deindustrialization in Philadelphia (University of Chicago Press). “This provides a device to think about how programs interact, how problems are completely interconnected in people’s actual lives, and how to you develop programs and services that meet the need most effectively.”
On top of the anti-poverty initiative, the Mayor used an executive order to launch a new task force on bolstering the city’s industrial economy, which according to probably overstated statistics employs some 23,000 people. Manufacturing jobs remain highly sought because they still tend to pay better than jobs in the service sector. Policy makers are hopeful to expand the sector, which has shrunk here by 90 percent since even the 1980s, because of recent growth in the craft and maker economy across urban America and because of high profile corporate moves by Apple and others to manufacture more in the US. The task force is to deliver recommendations to the Mayor by the end of August.
McKee notes that “if we can figure out where the viable sectors are, in relation to the geography of distribution channels, in terms of worker skill levels, in terms of intellectual resources, there are definitely possibilities for manufacturing. These aren’t going to be mass production plants that employs thousands of workers–they’re going to be either advanced manufacturing that does high value-added work, or possibly very specialized production that has a very defined market niche. And it will be very competitive to get and keep those firms in Philly.”
For years, starting in the 1950s, Philadelphia, well ahead of its peer cities, sought a proactive approach to reversing deindustrialization. City officials beginning with the administration of Joseph Clark created agencies–chief among them PIDC–land use policies, and initiative aimed at retaining and growing the city’s industrial sector, which had begun to significantly retract in the post World War II period. “The reason Philadelphia still has as many manufacturing jobs as we do is because there were actually some good decisions made in the 1950s-1970s (and beyond), even though we don’t usually think of that as a period of great leadership in the city,” says McKee, who believes Philadelphia officials in that period just weren’t aggressive enough.
Moreover, they failed to connect anti-poverty work with economic development. What’s exciting about yesterday’s announcements, according to McKee, is that “these are two parts of the same problem, and each group needs to see the other’s needs and perspectives.”
Some scholars say that the deindustrialization of that period extending into the 1970s was essentially intractable and no initiative at the local level, no matter how far-reaching, would have mattered. The old cities that ultimately fared best in the late 20th century, New York and Boston, did so because they invested in new economic sectors and education instead of industrial parks and that Philadelphia was held back by its continued industrial focus.
Those behind the Mayor’s new task force are likely to say that the present initiative is meant to exploit going economic and demographic trends not counter them, as City policy of the 1950s-1980s did. McKee imagines that “if you can start to develop cohort of such companies, you can start to build a culture and an environment where they feed off of each other in a good way. Even if none of them employ more than a few dozen people, the cumulative effect can be meaningful. And the secondary effects of manufacturing on suppliers, service providers, and even things like restaurants and real estate can be profound as well.”
And yet, local economic development and anti-poverty approaches are caught in a system of state and federal economic and fiscal policy over which they have little control. These factors threaten to marginalize the potential impacts of the new initiatives.
Philadelphia is a poor city with a high tax burden and a difficult bureaucracy that business investors find repulsive. But to try to lighten that burden in a way that business would find meaningful would mean significantly reducing the support services for the poor that are barely now sufficient and regular services–like libraries and the fire department and parks and rec–for everyone. And anyway, much of the tax burden on businesses in Philadelphia comes from the state of Pennsylvania, which has one of highest corporate tax rates in the nation. That combined with state economic development policy focused on resource extraction for the short term benefit of rural counties leaves Philadelphia and the region, still the economic engine of Pennsylvania, out in the cold.
McKee says Philadelphia needs Pennsylvania as a strong partner in order to make industrial development a real success.
But let’s say Philadelphia, as certain observers have been advocating for years, radically reduces its business tax and regulatory load. Poverty and its impacts will rise even more as City Hall struggles to pay its bills. In the market fundamentalist’s dream, the city goes through a period of instability and pain but the adjustment makes the city attractive to business in the short term and jobs get created, leading to economic revival.
Such a scenario is impossible because it would be morally and politically untenable–unless the federal government, which can impact macroeconomic policy, created a truly progressive tax code, and used the higher taxes to invest in education, worker training, day care, welfare, and infrastructure. In that dream, Philadelphia could risk lowering its tax burden because the federal government would be effectively leveling the economic playing field.
Significant enough change at the state and federal level is unlikely, however, and so Philadelphia remains stuck. What can it do? Yes, rightly exploit every opportunity to create jobs and give people a sense of opportunity and hope–and as McKee says, coordinate the approach to maximum impact.
Beyond that, particularly without a strong partner in Harrisburg, City Hall can only really do one thing: build–build for Philadelphians today, build to attract the Philadelphians of tomorrow. How and what and where we build is in our control; it’s in fact our only powerful lever for the future.
Philadelphia has one of the highest business tax rates in the nation, if not the highest tax rate. Philadelphia has one of the lowest rates of job creation, and has consistently lost businesses and residents as it has consistently raised taxes at the individual and business level post-1950. This is another wasted and token effort that does not address the total lack of competitiveness of Philadelphia compared to even nearby locales in terms of the tax and regulatory burden. Philadelphia has a bloated City government with a huge Pension and Benefits burden from City and Municipal employees, much of which remains unfunded (existing and retired employees do not contribute toward their pensions and benefits costs) and the scope of which is increasing alarmingly each year. Currently, 70% of the city budget goes to cover wages, benefits and pensions. We need to lower taxes and spend less money at the City and Municipal government level, and that includes pension reform.
So, when cities decrease the poverty rate… is that because people are getting better jobs? Or is it that the impoverished are displaced by higher-earning individuals?
And for Frank Rizzo, is Philly really not competitive? I understand the Business tax is high, and we are increasing the real estate tax, but doesnt Philly have the lowest cost of living? Is that not a competitive point? Do businesses really not choose Philly simply due to the business tax rates? Wouldn’t it cost them more to locate in NYC, Boston, Washington? I’m speaking out of ignorance though… but what really keeps businesses away?
In many cases, the high cost choice to be in NYC, Boston, or Washington, Tokyo or London, etc. is about the price of proximity to people and deals. Philadelphia comes at a cost, but without the obvious pay-off, particularly in the fields that people are willing to pay the high cost of entry. We benefit from the same logic, just not at the same scale. The question of what really keeps businesses away is complicated, but I think it has less to do with taxes than with perceived market benefit. In retail right now, Philadelphia is feeling hot and underserved and so you’ll see in this year a slew of new national retailers choosing to be here. –ed.
I’m far from being an expert in this matter, but just going with my guts feeling I’ve always thought that what lacks in Philadelphia is a “critical mass”, and this may be a common perception among investors too. I see plenty of small businesses with very good or innovative ideas, but then I don’t see a big resonance around them (whether it’s from the city backing business up or people creating a critical mass, which one comes first). So, as Nathaniel pointed out, it is about adjusting to a working/workable scale. Critical mass is surely also dependent on both scattered and mostly segregated residential distribution of people in Philly, which impacts people’s behavior and participation in the city life. Poor residents are easily cut out from emerging new (business) cultures and wealthy people are often disconnected from lively business experiments in the city. If these opposite poles could converge just a little bit more around new initiatives in the city, I guess a critical mass could start to kick in.
I would be surprised to know that cities like Washington or Boston do not have the same problem though, maybe other factors play a positive role for them.
“Use the higher taxes to invest in education, worker training, day care, welfare, and infrastructure. In that dream, Philadelphia could risk lowering its tax burden because the federal government would be effectively leveling the economic playing field.” That is to assume that if the government only spent more money than presently, then there would be the point when the poor and ignorant would realize that they no longer have to be poor and ignorant. Popkin, the poor will always let you down; they will not cooperate with your dream.
Hard to imagine the ways in which our society, compared to every one of our peers around the world, hasn’t let poor people down.
we still need the entry level kind of jobs like American Apparel provides in downtown L.A.
Rizzo is right ……….
If city government were a company , no one would invest in it , it would be audited because it plays a shell game with taxes and hides where the money goes. It would go bankrupt because it’s so bloated and inefficient .
When the city balances it’s budget and brings its books into the light of day like most publicly traded company’s
they can say they know how to help business .
When you consider environmental regulations and unions (which keep lower skilled out of the us in general) and a poor skilled workforce ( for higher skilled industrial jobs) Industrial development is a pipe dream in city. Though having some of these job back would definitly help.
However, having a truly progressive tax code and more funding for more welfare will not. We already have programs for housing, food, medicine, etc. While you might feel these programs might raised the standard of living to a certain “level.” What “level” have we raised it too? And have we kept these people trapped in poverty?