Chairman Mendelson and members of the Committee, thank you for the opportunity to speak today. My name is Ed Lazere, and I am the executive director of the DC Fiscal Policy Institute. DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low? and moderate?income residents.
Today’s topic is important because it puts a spotlight on how well work really pays for DC families and what the District can do to help boost wages for DC lowest paid workers.
A common perception is that families and individuals who have low incomes are not working. This perception is not accurate. Too often, work does not pay well for DC residents, leaving DC families and individuals in poverty and far below self-sufficiency levels. Consider the following:
- One of six DC workers has a “poverty level” wage, meaning they earn too little to lift a family of four above the poverty line even if they work full-time and year round. The poverty line for a family of four is roughly $18,000. The poverty wage is about $9.00 per hour. This group of workers is likely to include many who are employed in retail sales.
- More than half of all DC workers have wages that leave them below twice the poverty line.
- Some 69 percent of families with children that are poor have one or more working adults. (This applies to families in which the adults are not ill, disabled, or retired). Some of these adults work full-time or close to it, while others work part-time. Citywide, 28,000 residents, including 16,000 children, live in a working poor family.
This means that having a job ‘ even a full-time job ‘ is not enough to ensure that DC residents will be able to support themselves and their families adequately. While wages are driven by market forces, DC policy makers can take steps to bolster earnings for lower-wage workers.
Making better use of DC’s economic development programs is a critical place to start. The District spends a substantial amount of energy and resources on economic development but does not direct those resources to creating good jobs for DC residents.
Perhaps the most important example of this is DC’s Tax Increment Financing Program. Under TIF, subsidies are provided for private commercial developments, with the expectation that new t ax revenues generated by the completed project will pay off the subsidy. DC has awarded nearly $300 million in TIF subsidies in the last five years, resulting in over $1 billion of new investments. Yet DC’s TIF program has few standards to ensure that projects will benefit DC residents. Developers are not required to create a specified number of jobs nor to pay specified wages and benefits. This means that TIF can be used to support projects creating few jobs or poor-quality jobs.
Take, for example, the DC USA retail project in Columbia Heights, which will include a Target, Starbucks, and other retailers. A substantial TIF subsidy was awarded earlier this year for that project. The project will create over 1,000 jobs, but according to developers 94 percent will be low-wage retail clerk and security guard positions. Starting wages at Starbucks are less than $8 an hour, and starting wages at Target probably are not much different. While the DC USA will bring need retail to Columbia Heights, it also will result in more DC workers with poverty-level earnings.
There is a better alternative. My organization is working with a coalition to improve DC’s TIF program, which must be reauthorized by the end of the year. The coalition believes the District should use the powerful incentives and subsidies that TIF provides to create the following community benefits.
- TIF subsidies should be targeted on developments in blighted neighborhoods where retail services and private investment are needed most.
- Developers should be required to identify the number of jobs that will be created by the project.
- TIF subsidies should only go to developments that will create jobs with living wages and benefits.
- A portion of TIF subsidies should be used for apprenticeship or other job training services.
- The TIF program should have a “clawback” provision that requires developers to pay back some or all of their subsidy if the job creation and job quality targets are not met.
Improving DC’s TIF program would be a major step toward using DC resources to generating the kinds of jobs District residents need. Other steps include raising DC’s minimum wage, adopting a living wage for businesses that do work under contract with the DC government, preventing obstacles to union formation, and better enforcement of the existing apprenticeship and First Source hiring requirements.