A Holistic Growth Strategy for Philadelphia

On February 21, 2018—three weeks on the job as the Executive Director of the Economy League—at Councilman Johnson’s request I testified at hearings on the State of Tax Reform held by City Council’s Committee on Legislative Oversight.  While some media accounts simplified my testimony, this op-ed elaborates upon what I view as the need for a holistic growth strategy for Philadelphia.

Philadelphia has four core challenges: jobs, jobs, jobs, and schools.

You can pick your preference ordering, but these are the things that matter to capitalizing on Philadelphia's current upward trajectory. Right now, finding a rational and sustainable path to funding our city’s schools is deservedly getting significant attention, but this debate needs to occur in the context of our broader economic realities.

In the past few years Philadelphia has added jobs more quickly than the suburbs and several peer cities around the US, including New York. Today there are more than 700,000 jobs in the city—the most since the 1980s—yet our poverty rate is still stubbornly high, hovering close to 26%.

The best anti-poverty program we know is (quality) job creation.

There is no doubt much more we can be doing to spur job growth, and tax reform is surely part of the equation.  But as Philadelphia’s economy has become more vibrant, I contend that tax reform has diminished in relative importance to other strategies for promoting equitable and sustainable growth.

To be clear: tax reform is not unimportant.

In fact, a 1999 Economy League report set the stage for the Tax Reform Commission of 2003. In my view and in the view of many others, the City’s tax code disincentivizes business growth, and therefore job creation, by taxing business profits. A clear limitation of the Net Income side of the Business Income and Receipts Tax (BIRT) is that it applies only to corporations headquartered in Philadelphia. What is more, good local tax policy should privilege predictability and transparency, and this tax provides neither. Cutting this tax in a way that does not negatively impact City revenues would remove a structural barrier to growth. That is why the Economy League was an early signatory to the Philadelphia Growth Coalition led by Paul Levy and Jerry Sweeney. 

Yet I believe we may place too much emphasis on tax policy at the expense of other important strategies.

We need to remove barriers to employment for the tens of thousands of Philadelphians who are currently unemployed or underemployed. Firms consistently rank access to talent as far and away their top priority, especially as the economy becomes increasingly knowledge-based. And dense, diverse, amenity-rich places like Philadelphia are where top talent wants to be. We cannot be content with imported talent, however; we need to find effective ways to upskill residents in our many disinvested neighborhoods and connect Philadelphians living in poverty to career pathways. Better aligning workforce development resources with industry needs is critical to making this happen.

To this end, the Economy League was pleased to provide insight into industry and occupational dynamics for the City’s recently released workforce development strategy, Fueling Philadelphia's Talent Engine. We pointed to industries and occupations that are growing, pay well, and offer middle-skill job opportunities. The report Driving Tech Talent Growth in PHL was the culmination of an in-depth research and strategy initiative to better understand our region’s technology workforce and identify priority strategies to expand, deepen, and diversify that workforce.  Because career readiness is built on foundations developed early in life, the Economy League has also focused on the critical role of early learning, and has been a core partner in the Pre-K for PA campaign. 

Beyond talent development, we should be leveraging the strengths of our local economy to create growth.

The Economy League's Greater Philadelphia Export Plan shed considerable light on the potential to grow our export-led economy and urged regional leaders to enhance coordination within the local export support ecosystem. The Economy League report Growing the Impact Economy of Greater Philadelphia helped to catalyze the formation of Impact PHL, a collaborative that is advancing efforts to support both for- and non-profit enterprises that address social needs.

I am quite excited to announce that in the next few months, we will roll out the Anchor Procurement Initiative (API) in collaboration with the region’s major eds and meds.  API is designed to leverage the purchasing power of anchor institutions to create local jobs and grow local businesses. Other cities, including Baltimore, Detroit, Cleveland, and Chicago, have developed robust strategies for partnering with anchor institutions to drive growth, and the Economy League is proud be leading the way to add Philadelphia to this list. 

Which brings me back to tax policy. Obviously, if we are to successfully grow local businesses, we need to make sure we have a tax structure that does not stand in the way of growth. But we cannot stop there. The Philadelphia of 2018 is not the Philadelphia of 2003, and our economic policies should reflect the changed realities.