Decentralizing Federal Employment: Feasibility and Impact on Ohio Cities
Introduction
The events of September 11, 2001 and the subsequent War on Terrorism may have prompted a rethinking of the federal government’s role and function. The attack on the Pentagon, in particular, demonstrated the vulnerable nature of many federal jobs and facilities. These events reinforced already strong trends in reorganizing and streamlining the federal workforce. For example, under “reinventing government” in the 1990s the Clinton Administration cut 115,000 federal positions.
This trend should continue under Pres. George W. Bush who, under his Management Agenda, could subject almost 850,000 federal jobs to competitive bidding. In addition, the federal government is facing a human capital crisis, with more than 50 percent of the federal workforce eligible to retire by 2004.
This report examines the feasibility of one innovative approach to these personnel challenges: moving non-policymaking federal employment from Washington, D.C. to other areas in the United States. Several diverse cities and metropolitan areas in Ohio were used as case studies to demonstrate that possibilities for geographic dispersal.
Rethinking Federal Workforce Management
Workforce issues are among any organization’s most important and vexing management challenges. This is particularly true for employers such as the federal government that are primarily service providers whose responsibilities include managing contracts and implementing programs.
The federal workforce is the largest portion of the federal government’s operating costs. Managing its human resources is critical to its efficiency and effectiveness. Indeed, a fundamental building block to achieving an organization’s mission and goals is proper attention to human capital. “Yet,” notes a report the U.S. General Accounting Office, “many agencies have not sufficiently indicated how they will identify their human capital needs, nor how they will acquire, develop, and deploy their human capital to improve the economy, efficiency, and effectiveness with which they serve the American people.”
The skills and education required of its workers, and the basic employment structures and arrangements, are changing. Furthermore, the federal workforce is aging: The baby boomers, with their valuable skills and experience, are drawing nearer to retirement and new employees joining the workforce today have different employment options and different career expectations than the generation that preceded them.
Today, the average federal employee is 45 years old, and more than half the workforce is between 45 and 69 years old. By 2004, nearly one-third of the federal workforce will be eligible to retire and another 21 percent will be eligible for early retirement. Which means that more than 900,000 employees—over 50 percent of the workforce—will be eligible to leave federal service. By 2010, approximately 71 percent of the current federal workforce will be eligible for either regular or early retirement and 40 percent of those employees are expected to retire.
Competition from the private sector is putting constraints on the ability of the federal government to attract the highest quality technology workers, lawyers, scientists, and other specialists. At the same time, Washington, D.C. has become a less desirable place to live with high housing costs, high crime rates, and severe traffic congestion.
In short, the federal government can’t refresh its human capital fast enough. During the 1970s for every employee lost, one was gained. However, by 2007 only one employee will be replaced for every three that are lost, growing to one in four by 2012 and one in six by 2017.
Geographic Decentralization
When Washington, D.C. was selected as the site for the Capital of the United States, no one foresaw the large agglomeration of government and government-related activities present today. Today, the Washington Metropolitan Area is one of the largest in the nation. Its economic base centers on government, and this attracts consulting, public relations, law, advertising, lobbying and similar firms seeking influence.
The development of a metropolis with an economic base dependent upon government was never a conscious goal. When an agency added a new division, function, or activity, the first choice location tended to be Washington.
Even if the concentration of agencies in Washington, D.C. was a benefit in the past, that concentration may now be a liability. If planners could start today with a clean slate, given current technology and homeland security needs, the bureaucracy would likely be more geographically dispersed.
The federal government should consider a carefully designed program of decentralization for several reasons.
Political Culture
Numerous observers believe that the capital has become an insulated echo chamber, separated from the concerns of the bulk of the country and focused on a narrow set of issues on the Washington policy agenda. Decentralizing federal employment is not a panacea for political culture. While government employees will still have similar perspectives even after decentralization, the concern that government is dominated by the political ethos of one city could be mitigated through decentralization.
Partisan Politics
A principal reason for the creation of the civil service system was to shield government workers from political pressures. If more non-political work were undertaken outside of the Capital, the intended buffer would be reinforced.
Efficiency
Often size brings diseconomies of scale when new residents add more to the costs of running the region than the average resident. Diseconomies are frequently experienced in the form of longer commute time, other congestion, pollution, and high living costs.
Homeland Security
Limiting federal employment in Washington D.C. reduces the demands that the federal workforce places on security forces. This will mitigate exposure to terrorist threats and allow security forces to focus on protecting vital federal jobs and facilities. The anthrax scare of 2001 and the sniper attacks in October of 2002 provide two vivid examples of the vulnerability of government activity to security related disruptions.
Bureaucracy
Reasons given for a Washington location include the need for communications between the persons in one office in Washington, D.C. and persons in related offices. However, these personal contacts are sometimes exploited because they are important for private advancement of employees rather than agency efficiency. These directly unproductive activities are often a form of “rent seeking” and geographic dispersal may promote more efficient uses of time.
Private Business Development
If geographic dispersal relocates government agencies in regions where synergies with private sector activities can emerge, positive economic consequences can be anticipated. Businesses throughout the nation will have opportunities to learn from nearby federal agencies. Equally as important, government agencies may improve their management and technical operations from close proximity to businesses rather than other agencies.
Local Economic Impact
While Washington, D.C. is likely at a stage where more employment reduces efficiency, many other communities would experience external benefits from expanded employment. Some regions with slow employment growth face depopulation, as families must leave their hometowns in order to find work. Dispersal of employment to slow-growing regions would reduce the need for emigration.
Methodology of Feasibility Study
Five regions in Ohio were selected for a pilot study to examine the feasibility and potential economic benefits of decentralizing federal employment. If federal decentralization is feasible within the regions selected, then the scope for employment relocation should extend throughout the United States.
To conclude that relocation could be feasible, three criteria were used. First, the agency must not be tied to Washington for reasons essential to its mission. Second, the area targeted for relocation should be appropriate. Lastly, agency officials must not require frequent, face-to-face contact with other employees.
In gauging the ability of the federal agency to improve the local economy, potential economic linkages were major considerations. For instance, if a federal agency were engaged in a function that was closely related to local industry, the potential for sharing ideas, technology, and labor skills would be mutually beneficial. Additionally, the federal agency may be able to access an industry-specific labor pool, either for direct hire or on private contract.
The potential for stimulating the local economy included overall effects of the initial increase in employment. The relocation of one federal job will need to be supported by other local jobs and a modeling system was used to estimate the impact.
The ability of local areas to absorb federal jobs and to educate a workforce with particular skills was also part of the second screen. The real estate market, particularly office space availability, was another factor considered.
A third factor used to evaluate the receiving region was the willingness of local officials to accommodate new activities. Agencies should not be moved to communities that do not wish to grow. In the case of the Ohio communities we examined, officials interviewed for this study were universally favorable.
The five regions selected for the analysis were Akron, Cincinnati, Cleveland, Dayton, and Toledo, Ohio. These cities represent a wide range of industrial bases and unique resources. As such they are well suited for the purposes of this study.
Akron
The economic base of the Akron region has evolved from agriculture processing to the manufacturing of rubber products such as tires, and as that sector declined, the region now is centered on plastic and polymer technologies. The region also has a strong chemical research base.
A preliminary assessment of the potential for relocation suggests three agencies that could relocate and generate substantial local economic benefits. Relocating all three agencies would bring over 8,388 current jobs to Akron. These relocated jobs would create over 5,778 additional jobs, for a total of 14,166 total jobs created for Akron.
Cincinnati
The Cincinnati has diversified from an industrial base concentrated in heavy industrial production to a structure more comparable to the U.S. average. Currently wholesale trade/distribution, transportation services, retail trade, durable goods manufacturing, and financial services are key components of the regional economy. As a consequence, the Cincinnati region’s growth has been close to the national average during the past twenty-five years.
Moving the State Justice Institute and the Bureau of Economic Analysis to Cincinnati would have strong secondary benefits. While only 546 current jobs are being transferred from Washington, D.C. to Cincinnati, the total number of new jobs created by the relocation of these two federal agencies is estimated at 1,168.
Cleveland
The Cleveland region is large and can therefore provide numerous private sector linkages with most governmental agencies that may relocate. The economic base of the region has historically centered on manufacturing. This base is still important to the area, although manufacturing has been a declining sector within the regional economy. Cleveland has experienced rapid growth in both the financial and health care sectors.
The community has numerous strong downtown anchors, yet a need to strengthen the central business district remains. Locating additional employment there would help in this process. A broad and diverse economic base provides an environment that could easily accommodate the relocation of federal agencies. Economic linkages could be significant, generating almost 5,000 new jobs if the four agencies and divisions identified were relocated to the area.
Dayton
Historically, there have been three pillars to the Dayton economy. Military employment has been centered on Wright Patterson Air Force Base (WPAFB), a major logistics center for the Air Force. WPAFB is a source of innovation in communication, computer operations, and scientific research. Employment declines at the base continue to be a source of concern to regional policymakers.
Although mergers and acquisitions have diminished the corporate headquarters function somewhat, Dayton remains headquarters to several major technology firms. Although relatively small, the Dayton metropolitan area has several distinct advantages. The economy has a diverse base, steeped in research and development as well as high-tech skills.
Relocating the Office of Justice Programs was deemed to not be feasible because of its ongoing reorganization to help address counter-terrorism challenges. Decentralization of the Bureau of Labor Statistics was found to be feasible and would move 1,636 jobs and create a total of 3,109 jobs for the area.
Toledo
Toledo remains a manufacturing and production-oriented community although its manufacturing sector has experienced a major decline. The region maintains a corporate headquarters function including three Fortune 500 companies, all manufacturing–oriented. In the future, professional and service jobs are anticipated to grow most rapidly. Toledo currently has a high concentration of employment in production, social service and healthcare support.
The Toledo economy seems to be particularly well suited to relocating the U.S. Geological Survey and the National Highway Traffic Safety Administration. While about 1,500 jobs would be located initially, more than 2,625 jobs could be created through multiplier effects.
Conclusions and Considerations
This study shows that a more balanced geographic dispersion of federal employment is feasible and could provide substantial benefits to local region. At the same time, such a policy could reduce congestion and security requirements while also enhancing the political culture of Washington.
As a feasibility study, only a few agencies were considered. In almost all cases employment decentralization was feasible. Nevertheless, this report undoubtedly understates the feasibility of employment decentralization because the level of analysis was the agency as a whole. Within agencies there are numerous functions that could be decentralized.
Several possible implementation problems exist. First, many Washington-based officials believe that Washington D.C. is the natural place for federal government employment. Second, face-to-face contact is seen as critical inside many agencies. Third, many current employees might be reluctant to relocate other regions.
In light of substantial implementation problems, several policy suggestions may be useful. In order to overcome the assumption that Washington, D.C. is the proper site for all federal employment, a policy manual should set forth reasoned criteria for geographic location. Agencies should be required to consider alternate locations when employment is expanded. Consideration should be given to connecting the much publicized privatization movement with the decentralization movement.
In order to minimize the personal and financial costs of employment decentralization, it should be implemented as part of a long-term policy. Two periods when employment decentralization will be opportune are when reorganization occurs and when a new building is being considered or an existing building is renovated. Federal guidelines should require a consideration of potential decentralization at these points.
This article is based on The Buckeye Institute study Decentralizing Federal Employment: Feasibility and Impact on Ohio Cities release on June 26, 2003.
 |
Download the full version of Decentralizing Federal Employment: Feasibility and Impact on Ohio Cities |
[1] Secretary of Defense Donald Rumsfeld Interview with the Washington Times editorial board, United States Department of Defense News Transcript, June 27, 2002. Available at: http://www.defenselink.mil/news/Jul2002/t07012002_t0627wt.html.
[2] Ibid.
John P. Blair, Ph.D., is a Professor of Economics at Wright State University.
Dr. Blair has written or edited numerous books and articles.
Adrian T. Moore, Ph.D., is executive director of Reason Public Policy Institute. Dr. Moore oversees all
the Institute’s policy research.
Geoffrey F. Segal is director of Privatization and Government Reform Policy at Reason Public Policy Institute’s Privatization and Government Reform Center.
