Last week, Dr. Terry Clower was guest speaker for MCB’s annual Economic Outlook event, where he shared insights on the state of our national and local economies. MCB has sponsored the Economic Outlook event with Dr. Clower in January for the past 10 years.
Also last week, his article, “The D.C. Region’s Choice: Economic Competitiveness or Perpetual Mediocrity?” was published in the Washington Business Journal. In it, he and his colleague Jonathan Aberman describe their concerns that “Our region has been trailing national economic performance for an extended period of time.” The article is a call to action for an “all hands on deck” approach to ensure we diagnose the challenges and design solutions to reverse our region’s downward trend. The article is reprinted in its entirety below.
Reposted from the Washington Business Journal January 18, 2024 news article.
When you are winning it’s easy to forget why you are winning, but it’s also hard to imagine why you won’t keep winning. That is the trap that we have fallen into. After decades of success, our region’s economic future is cloudy. What has worked to drive our economy is working less well. And on a relative basis in the competitive market for talent and opportunities, our region is falling further and further behind. We are not going to be winners much longer.
Certainly, there have been victories that have masked this reality. Huge economic development wins such as landing Amazon HQ2 provide a sense that our region is still winning. The stability of government spending during times of national economic downturns encouraged us to ignore our growing competitive challenges. Winning when others are losing can be illusory, if the long term trends are ignored.
But here’s the reality. Our region has been trailing national economic performance for an extended period of time. Although federal government workers and contract spending remain the backbone of the regional economy and are not going away – growing fiscal challenges and the politization of federal employment raise significant questions for the future. We also see very clearly in long term trend data that jobs in our government contracting industry are not growing at the same rate as government spending. At the same time, employers have a large number of unfilled positions, particularly in information technology. Something is not right. We need to get to the bottom of this, and fast.
Being a “government town” is not the magnet for talent that it once was. And working in technology outside of government may not be either. Prevailing patterns in venture capital investment show that innovative local businesses outside of the government sector are not picking up the slack. Other sectors of our regional economy are also showing significant stress – commercial real estate in particular. The reasons for each of these trends require immediate diagnosis.
What is clear most of all, however, is that talent is leaving our region.
For nine years in row, the Census Bureau reports that more U.S. residents left the D.C. metro area than arrived. In the 12-month period ending in June 2022, the most recent data, our overall net domestic migration reached an unprecedented low of minus 66,400. We are still attracting young workers from college towns, but we are losing more workers among the 30 to 50 year old cohort, who are in their professional prime. We have become a revolving door for talent – a place to begin a career but not a place to build a life.
Why are people leaving?
One often referenced cause is our region’s cost of living. We know that talent is leaving Greater Washington and moving to Los Angeles, Tampa Bay, Dallas, Denver, Charlotte, and other cities in the south and mid-Atlantic states. With the exception of LA, all of these cities have a cost of living substantially below the DC region, and the differences in housing costs are even greater.
However, we suspect that there is more to the story than just affordability. Work environment, cultural amenities, schools, availability of affordable childcare, upskilling resources and job mobility, and the basics of what is perceived by many as being essential to a balanced and happy life are apparently more readily available in other places. LA, for example, isn’t cheap, but people are leaving here for there – perhaps there is something to being close to a beach.
Add to this the siren song of entrepreneurial opportunities in new industries. Many of the regions that are outperforming ours have burgeoning clusters fostering the development and growth of emerging enterprises. Northern California, Austin, New York, Nashville and other regions are attracting talent from our region. Silicon Valley isn’t cheaper than living here – but the entrepreneurial opportunities are clearly more widespread.
Add to this the now established trend of remote or hybrid employment. This challenges the current model of viewing our downtowns as areas of office building concentration, as well as the assumption that our talent will work in local enterprises, if they live here. Current models of real estate development and land utilization are under significant stress, with local tax policy implications.
Our region is at a crossroads. It’s time to evaluate our situation with clear eyes and for our region’s leaders to act.
Some immediate ideas that come to mind: a more cost-effective public transportation system, increased capacity for our roads and bridges, and land use regulations and practices that produce more affordable and flexible housing and reframe our built environment for modern society. We must also address crime in our neighborhoods, build support for parents to participate in the workforce, create an eco-system that supports business development, and collaboratively market our region as a place for business investment and as a place to build a life. Yet, what we need most of all is an agreed-upon set of regional solutions to meet these needs.
Over the next year, the Center for Regional Analysis will collaborate with key partners to help us diagnose our region’s challenges. We will offer implementable solutions to reverse our downward trend. We will be calling out what does and does not work and promoting the efforts of individuals and groups who are taking action to solve problems. We care about this region and are sincerely concerned that this is a moment when none of us can remain silent and hope for things to just work out.
This is an all hands on deck moment. Working collaboratively on addressing our problems is essential. We may be challenged by being at the intersection of three state entities with complicated political relationships, but our choice is simple – become a more collaborative and competitive place to live and do business or learn to live with the consequences of perpetual economic mediocrity.
Terry Clower, Ph.D., is the director of the Center for Regional Analysis at George Mason University’s Schar School of Policy and Government. He is also Northern Virginia chair and professor of public policy at the Schar School. Jonathan Aberman, LLM, is a senior visiting scholar at the Center of Regional Analysis and a partner in Ruxton Ventures.
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