Guest Editorial: Twitter and Jobs

by Michael Bernick on February 15, 2011

Enough, already. The current Twitter payroll tax dispute is an important issue in job creation. However, it cannot be discussed sensibly outside of the context of previous job creation efforts by San Francisco government.

A very quick overview, starting with the last large-scale public sector job creation in San Francisco under the federally-funded Comprehensive Employment and Training Act (CETA). In the latter 1970s, CETA funded local governments throughout the country to create public service jobs within the government structure. The approach has not been tried since for several reasons, including in San Francisco the high cost of each job created, the disputes with unions, and fairness issues related to who among the unemployed received jobs and who did not.

When the Obama Administration developed the federal Stimulus, the $789 billion American Recovery and Reinvestment Act, in late 2008 and early 2009, it rejected direct public sector job creation. Instead it turned to increased government spending in transportation, education, alternative energy, and other infrastructure to spur hiring in the private sector. The Stimulus did succeed in San Francisco and elsewhere in undertaking and completing infrastructure investment and in hiring. However, job costs associated with infrastructure often came to over $80,000-$100,000 per job year, and many of the jobs ended when the infrastructure projects were completed.

Both within the Obama Administration and outside of the Administration, a hiring tax credit and/or payroll tax reduction became a favored approach in 2010. Economist Tim Bartik of the Upjohn Institute and Cornell economist John H. Bishop , were among the national leaders in advocating a job creation tax credit for the private sector. The economists suggested a 15% federal tax credit that they estimated could create 2-3 million jobs, at a cost of $5,400 per job; and this became a part of Democratic job proposals.

The proposed payroll tax reduction for Twitter represents a fraction of the money spent per job under CETA, the Federal Stimulus, or current job subsidies under the Workforce Investment Act, and a fraction of the cost associated with other tax credit approaches. Further, Twitter offers a range of job creation benefits not present in other job creation approaches, chief of which is the promise of spin-off business growth. There is a good chance that other entrepreneurs with internet-based or social networking business ideas will want to locate near Twitter, for contacts and the interchange of ideas.

There are legitimate issues raised by critics of the Twitter proposal, related to fairness to other existing and new employers in the area, and in other economically stagnant areas of the City. However, a payroll tax deal can be structured to address these issues.

Finally, I might note that I lived in the mid-Market/Tenderloin area for 5 years in the early 1980s (at 378 Golden Gate), and have followed the many economic development proposals for the area in the years since. The City funded several studies and designs over the years to revitalize mid-Market, none of which had much impact. The corner of 9th and Market has been a particularly bad dead space: joyless, with no street life or economic activity.

Frankly, the City should be thrilled that Twitter might now locate at 9th and Market. Most of the rest is mainly hollow ideology.

Michael Bernick was the director of the state labor department, the Employment Development Department, from 1999-2004. He continues to be involved in community job training in the Bay Area, including as an advisory board member of Positive Resource Center, located in the mid-Market area.

Filed under: Archive