Thursday, March 10, 2011

First, Let’s Fix First Source

Here is an interesting fact to ponder: approximately 70 percent of jobs in the District are held by people who do not live in the District.

This imbalance is problematic. One reason it is problematic is that the income earned by that 70 percent goes home to be taxed in Maryland or Virginia. The District's Chief Financial Officer has estimated the lost revenues at $34 out of every $100 earned.

In a time of tight budgets, we need to address this leakage of potential revenue from DC into the suburbs.

But how do we change the percentage? How do we get DC residents back to work?

The answer to that question is complex. We need to help long-term unemployed residents address many of the serious challenges and barriers they face. But we also need to ensure that qualified DC residents have access to job opportunities.

One tool to help ensure such access is the First Source law.

Our tax dollars support many projects that create jobs. Look around the city – there is a good chance that the building going up in the construction site across from your office is partially funded by the taxpayer-funded DC government.

Support can be direct – in the form of a contract to erect a building for a District agency, for example, or to provide job training or some other service. It can also be indirect. DC, like every other city in the nation, offers businesses a variety of tax and other incentives to encourage them to build buildings or open stores and restaurants here.

The District's First Source Act is intended to ensure that when our taxpayer dollars are invested in these projects, they increase employment opportunities for District residents.

The law requires nearly all employers that receive contracts or other forms of government assistance worth $100,000 or more to give priority for new jobs and apprenticeship opportunities to residents of the District.

Priority here means that employers must use the DC Department of Employment Services (DOES) as the "first source" for recruitment, referrals and placements for projects in which District taxpayers have made some kind of investment, financial or otherwise.

This process is supposed to result in the hiring of DC residents for at least 51 percent of all new jobs created by the publicly-supported project and at least 35 percent of apprenticeship hours.

Unfortunately, the First Source law has not been terribly successful in generating jobs for DC residents.

There are two primary reasons the law has not worked well.

First, the First Source law has not been effectively enforced. Last year, the DC Auditor reported that only one-fourth of the projects reviewed met the 51 percent goal, mainly because DOES was not sufficiently staffed to monitor them appropriately. As a result, the District and its residents lost more than $14 million in job revenues.

And last year was not an anomaly. There is no record of any employer ever having been fined for noncompliance with the First Source law. And it was enacted in 1984.

A second equally important reason is that the First Source law has major weaknesses that allow District contractors to legally avoid compliance with the law. For example, they can comply with the law by proving they made a "good faith effort" to hire DC residents, but were unable to find suitable candidates.

This may seem reasonable, but the law sets the bar pretty low in defining what constitutes "good faith." All employers have to do is show that they ran an ad in the classified section of the paper of record (in DC, that’s the Washington Post) and posted a notice on the District's online career center.

A broad coalition of local organizations, including the DC Jobs Council, recently produced a brief that recommended a new structure to address these weaknesses. It offers an alternative to the current DOES referral process—an independent "workforce intermediary" that would serve as a broker between covered employers and local training providers.

With a workforce intermediary to complement current First Source requirements, job seekers would get training tailored specifically to jobs the employer expects to create. The employer would get qualified candidates who had been pre-screened and directly referred by the intermediary.

And the District would have more residents working in good jobs—and paying taxes.

DC Council Chairman Kwame Brown, joined by Councilmembers Michael Brown and Harry Thomas, Jr., has introduced a bill – the “District of Columbia Workforce Intermediary Establishment and Reform of First Source and Living Wage Amendment Act of 2011” -- that would establish such an intermediary. Among other provisions, the bill also closes – at least partially -- some of the loopholes that allow employers to comply with the letter, but not the spirit of the law.

The bill is no silver bullet, and we believe it could be improved in several specific ways, but it is a good start.

I will be presenting testimony on the bill at a hearing of the Council of the District of Columbia’s Committee on Housing and Workforce Development on Monday, March 14, beginning at 10:00 am. My testimony will be posted on the DC Jobs Council website by COB on Monday.

In addition, I am scheduled tentatively to talk with News Talk host Bruce DePuyt on Friday, March 11 at 10:00 am. You can watch it on News Channel 8 or online at The show reruns at 4:00 pm and again at 6:00 pm.

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