Friday, May 21, 2010

Engines of Economies

By Matt
This post is from our sometime contributor Matt C.

Small businesses create jobs, and everyone knows it, right? Mainstream media outlets and wonkish blogs alike have referred to small businesses as the "engine of job creation" for the United States. Talking heads sing their praises as local leaders woo them. Even Presidents extol the virtues of these diminutive economic saviors.

But even as leaders, reporters and conventional wisdom tell us that small businesses create jobs, new research is calling that assumption into question. This oft-repeated snippet of common knowledge may not actually carry the policy-driving implications we assign it. In one way, it's true that small businesses create a lot of jobs. The implied causality, however--that being small is what makes a business better able to create jobs--might be a complete illusion.

By analogy, consider this statistic: A lot of drownings occur on days during which a lot of ice cream is sold. It's 100% true. Drownings and ice cream sales are highly correlated. But while ice cream sales is a good predictor for drownings, there's a better one: temperature. When it's hot outside, people buy ice cream and go swimming (dramatically increasing drowning chances). Not every day with a lot of ice cream consumption leads to high drownings, but it's close enough to be useful if you don't have any weather information.

Likewise, economists and policy makers have been using the size of a business as a proxy for a much more important variable in predicting job creation potential: recency of entry to a labor market. To state the driving causal relationship, we shouldn't say that small businesses create jobs, but rather, that NEW businesses create jobs. And it just so happens that most new businesses are fairly small (just as most days with a lot of ice cream sold are reasonably warm).

Many small businesses are extremely weak engines of job creation, and most of them have been around for a while. Most sole proprietorships will never employ anyone for very long, and small, stable local businesses and stores don't expand their payrolls with much effectiveness. The small businesses which are best at creating jobs are the ones on their way to become large businesses; they don't stay small for decades. It's time to admit that the fifty year old corner store is not the engine of job creation for the country. It's Sergey and Larry, not Mom and Pop.

The age of the business is a better metric than size, but an even better indicator of hiring potential is the time a business has been in a particular labor market. A multinational conglomerate entering a new market can be an extremely powerful force for job creation. It's not discussed as widely and the impact of small businesses, but a one hundred year old company opening up a new plant or a new market is likely to create more jobs than entire towns full of small businesses.

Fine-tuning the metrics we use as predictors of job creation potential can help fine tune the "engine of job creation" so lauded in the press. Policy makers focusing incentives on new businesses instead of small businesses will be able to spend more wisely. Targeting small businesses in a major city can give hundreds of millions of dollars in tax breaks to some of the organizations least likely to create new jobs. But targeting new businesses only would be a more precise scalpel.

When Philadelphia looks to encourage economic growth, leaders should pay attention to all the research available on job creation. By eliminating business size as a criterion, we avoid repeating mistakes which have taken money out of public coffers in favor of independent consultants and small law firms whose personnel tend to be well off and stable in number. Alternative strategies haven't worked either; efforts to give job creation incentives by targeting new real estate developments usually accomplishes more job movement than creation (while leaving a lot of empty office space). New entrants to the job market are much more likely to respond to incentives, and policy makers should target them accordingly.

It's time to rethink our approach to economic incentives, and restructure our notions of the engine behind American job creation. We have to disassociate our yearning for the idyllic quiet American main street lined with shops and businesses from our economic policy. Recovery isn't going to found in small town storefronts, but rather in garages, basements, and yes, the board rooms of expanding multinational conglomerates. It's time to reform the refrain. Let's get used to saying, "New businesses are the engine of job creation in the United States."

Thursday, May 13, 2010

What parking really is

If you read Underground garage hits high-tech heights you will be forgiven thinking that the only interesting thing about the article is the technology described therein. However I was floored by the following quote: "This advanced technological solution to what he calls 'this building's tiny footprint' came from Parkway Corp.'s chairman and chief executive officer, Joseph S. Zuritsky, a partner in 1706 Rittenhouse with developer Tom Scannapieco." In Philadelphia, Parkway is associated with commuters looking for early bird pricing and diners who have given up driving around for half an hour and are finally willing to pay upwards of $20 to park. But Parkway is also a real estate development firm, their website notes that:
"Parkway has been in the field of real estate development for close to 70 years. We own, operate, and manage over 100 properties in the United States and Canada including surface and multi-level parking facilities. We have office space and retail space for lease as well as properties available for sale, and co-development."
Cities across the US are only now beginning to realize that parking is not about just parking but it is about asset and land management. It's just a shame that they are far behind the curve of the parking lot companies themselves.

Tuesday, May 11, 2010

The Soul of a City

By Ariel
Cities have souls. If humans, themselves collections of sinews, organs and tissues can have souls, surely so can cities with their streets, parks and electric grids. While different religions ascribe different properties to the soul of a man or woman, there are a few more standard proxies for measuring the soul of a city. They amount largely to two things, the strength of the neurosis that its citizens have about their city, and the percentage of people currently living in the city who are from said city.

Neurosis: There used to be a billboard (or so I am told) along I-95 that read "Philadelphia: it's not as bad as Philadelphians say it is." Residents with cities with souls have a neurotic obsession with their cities, an obsession with the identity of the city and how things get done there. It does not have to all be neurotic, New Orleans felt like a city suffering from collective post traumatic stress disorder when I was there, and San Franciscans seem to have an enormous amount of near narcissistic love for their city, seeing the city as the reflection of their own potential and ethos. While I may use psychological terms fast and loose, I do believe that these cities all actively acknowledge or wrestle with a sense of identity and what it means to be from that city.

Percentage of Natives: When someone asks you in Philadelphia or New Orleans, what school did you go to, they mean, what High School did you go to (not, like in Manhattan or DC, what college). This is not just evidence of a sort of parochialism, it is also a sign that natives have deep roots in these cities. Having a high percentage of people from the city, distributed across income brackets, means that people across the city have memories of the city. A friend of mine living in Albania, had an address that said "Mike, above where Disco-My-Heart used to be, Behind where the rice factory used to stand." While cities need immigrants and churn, new people moving in and out, for a city to have a soul, it needs people who remember what used to be on that corner a decade a go.

I often flippantly say that DC has no soul, so many people move in and move out so quickly in that City that its neighborhoods are forgotten and without identity. My friends who are from DC argue with me, noting that such a characterization is only applicable for NW DC, a white capital-hill-centric DC. I would be willing to concede some of that, but if half the city does not pay attention to itself, well I still think its souless. Manhattan too, it could be argued, is loosing its soul as it becomes more and more expensive and more and more out-of-towners live their and have lost the memory of a grimier and livelier past.

Some of this may sound like simple urban romanticism, but in the end successful cities are those that encourage people to live in them and raise their children in them. Not all these cities are functional, but they do have people passionately fighting for, well, their souls.

Wednesday, May 5, 2010

A TIGER drinks a Pepsi

By Ariel

Recently the Planning Collective partnered with the East Passyunk Avenue Business Improvement District to compete for $50,000 from Pepsi to transform a chaotic 6-way intersection into a community asset. They will, in essence, be bringing Broadway to South Philly: the very same reclamation of auto-dominated right of way and transformation into pedestrian node like was done in the heart of NYC and San Francisco could now emerge in Sou' Philly. I urge you to go here ,vote, and make this project a reality.

After you vote (early and often, in the truest of Philadelphia traditions) poke around the website, you will may see the future of planning in America.

As citizen's appetites for taxes diminishes even more rapidly, the federal, state and local governments have access to fewer and fewer funds to invest in their communities. This means not only that there is less money to play around with, but that it is harder to get. No wonder the US DOT made TIGER a competitive grant, it’s just disheartening that they received approximately $56 billion worth of proposed projects, for only $1.5 billion worth of funding. With less access to capital, planning and public investment will only get more competitive.

With foundations only able to pick up so much of the remaining tab (due to trust funds reduced by economic nose dives and their many different internal missions) it’s no wonder that the private sector is jumping in. I don’t know how many people have clicked on Pepsi’s website and registered their information to vote for their friends’ projects, but surely it’s worth the $1.3 million worth in grant funding they are distributing.

That being said, please do click here and help bring a little bit of green to South Philly.