How DC Can Strengthen the LivingSocial Deal to Promote a High-Tech Hub?
Mayor Gray and LivingSocial executives say that it’s worthwhile to give the daily deal company $32.5 million in tax breaks because LivingSocial will be a catalyst for a new high technology sector in DC. The legislation authorizing this deal is currently before the DC Council. How can DC make the most out of this deal to ensure this will happen?
First, the DC Council should improve the legislation by requiring LivingSocial to maintain its product development headquarters in the District. LivingSocial is a relatively new and dynamic company, so it is unclear how successfully the company will grow, much less how it will impact the growth of other tech-related ventures. However, what is clear is that one way to help create the conditions that would catalyze the development of a high-tech hub would be to require LivingSocial to keep producing software development and IT-related jobs in DC.
But spurring a high-tech hub goes beyond simply having LivingSocial make DC its product development headquarters, because a headquarters can be a headquarters in name alone. So legislation should also require LivingSocial to certify that at least 15 percent of its DC-based employees work in software development and IT — the current share of DC employees in these positions. Without such a benchmark, the current legislation would allow LivingSocial to grow in DC while shifting its tech-related divisions to other offices outside the District. This would hamper the goal of building a tech-hub.
The makeup of LivingSocial’s workforce highlights a key distinction between companies that develop and innovate technological products and those that simply use technology to further their underlying business activities. While LivingSocial employs software engineers, web developers, and other technologically-engaged workers, the majority of its employees are engaged in work that is not technological in nature. LivingSocial executives have indicated that about 15 percent of their DC-based workforce is made up of high-tech jobs. Beyond that, LivingSocial employs many copywriters and individuals that are engaged in business and marketing activities. If the District’s goal is to catalyze a high-tech hub, it makes sense to incentivize high-tech jobs. It does not make sense to allow those jobs to leave — as the legislation currently would — while subsidizing sales and administrative positions.
As well, the community benefits in the legislation should have verifiable benchmarks. The District and LivingSocial should outline specifics, such as the number of businesses and individuals that will receive technical training in software development and social media. Moreover, LivingSocial should enter into formal partnerships with District educational institutions to ensure that DC students studying computer science and engineering can be put on a pathway towards future employment with the company.
Neither the District nor LivingSocial can guarantee that LivingSocial’s presence will catalyze a high-tech hub in the city. Nevertheless, the legislation can do a better job of promoting a high-tech hub by ensuring that LivingSocial continues to add tech-related jobs in the District and commits to training and working with DC students and businesses.