Tax Breaks for Tech Hiring: well….

As most readers know, I am an avid tech startup junkie with a strong interest in how tech companies are both reacting to and themselves remaking economies, both through their works and products and through the fundamentally different approach that people trained in the tech world bring to decision-making, innovation and problem-solving — issues that our communities definitely need some help with.  But,  becaus they operate on a fundamentally different model, they don’t always have the ability to live up to our usual expectations.

This article, which I originally read in San Francisco’s Central City Extra during a trip

computer keyboard

there this fall, does a very good job of highlighting something that tech businesses don’t easily or universally do: create large numbers of jobs, especially the kinds of market-driven living-wage jobs that we so need for our disadvantaged communities.  As the article outlines, a tax incentive designed to prod this neighborhood’s burgeoning tech companies to hire local residents — not just into service jobs, but into tech jobs, where they could learn and build valuable skills.

However, the tax break has generated very little impact — according to the article, one full time job and five summer internships. 

The article doesn’t attempt to deeply analyze what happened, and as an outsider I hardly feel qualified to make a definitive diagnosis.  However, it looks like a few issues might be at play.

One that non-tech people often find it hard to grasp is that the tech business growth cycle is often hyper-accellerated as compared to more traditional businesses.  Tech people and tech business funders engage in regular mad races to get the product out, get updates out, etc.  The Red-Bull slugging, sleeping-in-the-office stereotype is a stereotype, but like any, there’s a germ of truth to it.  My slightly educated guess would be that this makes it hard to bring on a person who does not already have appropriate tech chops — it’s not an environment that’s well set up for training people.  Second, the fact that these businesses tend to be funded by angel and later venture capital, which wants a massive return in a relatively short time, both reinforces that pressure and, I would guess, makes it hard to do anything that, while having long-term benefits, might not pay out right away.

In a sense, this is an even more intense version of the lean pressure that economic developers see in lots of types of growth businesses, from advanced manufacturing to health industries.  If the ongoing pressure, the accepted way of doing business, is speed, speed, pivot, pivot, then the bandwidth for in-house training almost by necessity becomes razor-thin.

Perhaps more than a lesson about incentives, perhaps this story ends up being more of an slit window into the future of business growth.  If so, that may indicate that the frustration that some in economic development are feeling in terms of businesses not making the effort to train for themselves the people that they claim that they need so badly is, in fact, a leftover of an era of business self-sufficiency that, for better or for worse, seems to be fading away quickly. From a purely pragmatic standpoint, it may be impractical to expect businesses to train their own tech specialists, because the pressure on them to remain light and agile works in direct conflict with that goal.

That doesn’t mean that there is no hope, however.  As part of the ongoing trend toward lean, agile operations, businesses increasingly outsource the tasks that they need but aren’t in their core competencies.  Procter & Gamble doesn’t make most of its own bottles.  Car manufacturers source electric harnesses from businesses that specialize in making them.  Outsourcing can cause problems, but it also creates a certain resilience in the whole system.  From the outsourcing business’s point of view, the risks of lack of control are largely offset, or at least managed, by the ability to specialize.

Perhaps this is the model that we should be looking at more aggressively as workforce development becomes a more and more integral part of economic development.  Perhaps part of the profession’s new role is to be the outsourced manager or provider of talent pipeline — the ones who make sure it’s done right and fits, like the electrical harness provider.  And put that way, it’s a necessary service that even lean businesses may be more easily persuaded to help fund.  After all, outsourcing is a model that they’re used to.  As the story from the Tenderloin indicates, training within, increasingly, is not.



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