The federal government plays a major role, but it is not the single largest industry in the region.
Washington, D.C., has always been known as a city of power. But beyond politics and diplomacy, it is now the center of a big, dynamic, successful and diverse economy, one that is quickly becoming an important player on the global stage. As I wrote in last month in The Atlantic, Washington’s economy has "clearly prospered from federal spending; lobbying and government contracts are significant sources of its wealth. But its economy is not entirely or even predominantly parasitic." The D.C. metro area has in fact developed a diversified tech and knowledge economy. The Washington Post’s Jonathan O’Connell picked up on this earlier this month, noting in jest, "It’s not just cupcakes anymore." Urbanist Aaron Renn has put it this way: "We’re witnessing the start of Washington’s emergence as America’s new Second City."
But to what degree has government activity shaped the region's economy in both direct and indirect ways?
To get at this, I asked the labor market data and research firm EMSI to run the most current numbers on the region’s job growth for the period 2009 to 2013. We did this both by industry (referring to sector of employment, such as federal government, the finance and insurance industry, or the health and education sectors) and by occupation (tracking the different jobs individuals perform, regardless of the industry in which they are employed, such as manager, software engineer, or designer). EMSI also undertook a detailed analysis of both the direct and indirect effect of government activity on the region's job picture.
The bottom line: Greater D.C. has evolved into a leading-edge knowledge economy, where private sector knowledge, professional, and creative jobs outnumber direct government jobs. But government remains the central pivot point of the region's knowledge economy, stimulating a wide range of direct and indirect spinoff jobs.
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Relative to the rest of the country, it's still fair to describe greater D.C. as a government town, with the government being a major employer. According to the EMSI breakout, the federal government employs roughly 467,000 people, or 14 percent of the region’s workforce. When local government, which employs 238,000 (making it the region’s third largest industry) and state government, which employs nearly 84,000 more, are added in, the figure rises to nearly 790,000 workers, roughly a quarter of the region’s workforce. Since 2009, the federal government has added just 11,000 new jobs, a 2 percent growth rate. In comparison, there have been more than 16,000 jobs added in local and state government, which grew 4 and 9 percent, respectively.
But the single largest industry in D.C. is not the federal government. Rather, it is "professional, scientific, and technical services" – highly skilled private sector workers in law, accounting, medicine, architecture and engineering – which accounts for more than half a million jobs, comprising a full 15 percent of the metro's workforce. The region has added nearly 17,000 new professional services jobs since 2009. Moreover, the metro area has a high concentration of professional service jobs, as measured by its location quotient (or LQ) of 2.5 (LQ measures the concentration of an industry by measuring its share of local employment to its share of national employment. This means the concentration of these jobs in D.C. is two and a half times the region’s expected national share). This is higher than the concentration of government work across the board, which has an LQ of 1.4 (though the LQ for federal government work alone is higher, at 4.2).
Professional and service jobs are not the only kinds of private sector knowledge jobs in which the region does well. Greater D.C. is home to 300,000 health care and social assistance jobs, which grew at an 8 percent rate; nearly 110,000 private educational service jobs, which grew at a 13 percent rate; nearly 100,000 finance and insurance jobs, which actually grew 3 percent despite the recession; and 76,000 information jobs. These last two categories are very highly paid, averaging more than $120,000 in wages and salaries. The region is also home to just under 50,000 arts, entertainment, and recreation jobs – about the same as the number of lawyers in town.
The graph below looks at the most concentrated industries in the Washington metro area, charting their relative concentration against the rate of employment growth that these industries saw between 2009 and 2013. The size of the bubbles refers to the overall number of jobs in each industry in 2013. Notice that though federal government is more concentrated than the professional services industries, this latter category saw both more overall jobs and a faster rate of employment growth over the last four years.
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The best way to understand the greater Washington region’s economy is as a high-human capital economy. As I noted in The Atlantic last month, "The ultimate source of the region’s wealth is Washington’s unparalleled human capital. The population is the best educated of any large metro’s in the United States; about half the region’s adults hold bachelor’s degrees, and nearly a quarter have graduate degrees.” In fact, the region has more than twice the national share of 25-and-older adults with a graduate degree or higher (an LQ of 2.2). The next closest large metros are San Jose (LQ of 1.9) and Boston (1.8).
It's also useful to drill down further into the region’s human capital economy by looking at the specific occupations that make it up. This tells us a great deal about what its workers actually do and the kinds of skills they possess and use on the job. This analysis provides a more nuanced look into the region's knowledge economy than can be had by looking at either education levels or even the sector in which they are employed alone.
|Top Occupations by Employment in D.C. Metro Area (at 3-digit SOC level) for 2013*|
|Occupation||2013 Jobs||2013 LQ||Median Hourly Earnings|
|Business Operations Specialists||229,873||2.34||$39.53|
|Retail Sales Workers||155,382||0.81||$10.80|
|Food and Beverage Serving Workers||129,269||0.86||$9.80|
|Information and Record Clerks||107,689||0.88||$17.99|
|Construction Traders Workers||101,866||0.88||$21.19|
|Building Cleaning and Pest Control Workers||100,801||1.09||$11.91|
|Other Management Occupations||97,629||1.34||$49.21|
|Health Diagnosing and Treating Practitioners||94,366||0.85||$52.29|
|Secretaries and Administrative Assistants||93,752||1.03||$23.13|
|Note: Note: EMSI figures or estimates based on three-digit occupational data from the Bureau of Labor Statistics' Standard Occupational Classification* system supplemented by data from employment services offices at the state/district level.|
The region’s top two occupations are business operations specialists and computer occupations, both of which employ over 200,000 workers each. Further down the list are several other well-paid, high-human capital jobs. The region is also home to 87,000 financial specialists, 78,000 top executives, and 53,000 engineers, each of which outnumbers lawyers.
Digging down deeper, we looked at the concentration of jobs (measured by LQ) for a more detailed level of data, breaking down by individual occupation descriptions.
|Most Concentrated Occupations in D.C. Metro Area (at 5-digit SOC level) for 2013*|
|Occupation||2013 LQ||2013 Jobs||Education Levels|
|Political Scientists||24.61||3,831||Master's degree|
|Social Scientists and Related Workers, All Other||8.84||6,633||Master's degree|
|Mathematical Science Occupations, All other||8.77||299||Bachelor's degree|
|Legal Support Workers, All Other||8.51||10,476||Long-term on-the-job training|
|Artists and Related Workers, All Other||5.84||1,769||Long-term on-the-job training|
|Information Security Analysts||5.70||9,562||Bachelor's degree|
|Physical Scientists, All Other||5.49||3,599||Bachelor's degree|
|Note: Note: EMSI figures or estimates based on detailed, five-digit occupational data from the Bureau of Labor Statistics' Standard Occupational Classification* system supplemented by data from employment services offices at the state/district level.|
The occupations with highest concentration (measured by LQ) are overwhelmingly highly skilled, creative positions. At the top are political scientists with a LQ of nearly 25, followed by economists (12.6); social scientists (8.8); and mathematicians (8.8). Legal support workers are next with an LQ of 8.7, but then come astronomers (7.3), statisticians, (6.1), artists (5.7), information security analysts (5.8) and physical scientists (5.5). Notice the high concentration of artists, relative to even some of the more stereotypical D.C. jobs (lawyer, for instance, falls far lower with an LQ of 2.85).
• • • • •
The D.C. region’s economy, like America’s as a whole, is also becoming split between high-skill, high-wage knowledge jobs and low-wage, low-skill service jobs. On the one hand, high-wage jobs (paying above $21.14 per hour) have made up 59 percent of the region’s job growth since 2009, second only to San Jose over the same time period. But low-wage jobs (paying up to $13.83 an hour) have made up 34 percent. Mid-wage jobs (paying between $13.84 and $21.13 an hour) have made up a paltry 7 percent of total job growth, according to EMSI figures. What’s more, low-wage jobs have grown at the fastest rate, increasing by 9 percent, while high-wage jobs have increased by 4 percent and mid-wage jobs by just 1 percent since 2009.
Alongside large numbers of high-wage, high-skill jobs in fields like professional services, meds and eds, and government, the greater D.C. economy is made of enormous concentrations of low-wage, low-skill jobs in fields like retail trade (which pay on average $35,000) and accommodation and food services (which pay a paltry $25,000). Together these two industry categories account for roughly half a million jobs across the region, including more than 40,000 new positions since 2009, according to EMSI estimates. This growth is nearly equal to the number of new positions that the government and professional services industries added combined. Food service and accommodation jobs grew a whopping 13 percent between 2009 and 2013.
The region’s bifurcated labor market – with knowledge-intensive industries on one hand and low-skill service jobs on the other – is shaping and reinforcing deep geographic as well as labor market divisions in the area. As I discussed this winter in my series on the city and region's class divides, those with high-wage knowledge, professional and creative jobs heavily clustered and concentrated in the District’s Northwest quadrant, gentrifying neighborhoods, and affluent suburbs like Bethesda, Arlington and Alexandria. In D.C., low-skill, service workers are largely concentrated in the eastern half of the city itself, particularly in Anacostia and other parts of Southeast, as well as in the suburbs of Maryland’s Prince George’s County. The region's geography is splitting along class lines, giving rise to a landscape of concentrated advantage side-by-side with concentrated disadvantage.
• • • • •
D.C.'s economy has come a long way from its days as a sleepy government town. It has evolved a highly educated, highly skilled economy that is driven by knowledge, technology, and creativity. But its economy is also one where government plays an important role, both through direct employment and through more significant indirect multiplier effects. If great research universities are the hubs of other knowledge and tech regions, the government broadly can be considered the hub of D.C.'s knowledge economy. But where the government has done much to stoke the fire of the region's knowledge economy, it appears to have done little to mitigate the splitting of its labor market and the growing geographic divides across the larger region. As I have written before, it's time to develop new strategies and approaches for closing these divides by turning low-wage service jobs into higher-paying, family-supporting jobs. Ironically and troublingly, today's reality may well be that on the balance the government may actually be contributing to the region's economic and geographic divides.
*Correction: An earlier version of this post incorrectly described the sources of occupational data. The individual occupational breakdown is classified using the Bureau of Labor Statistics' Standard Occupational Classification system.
Top Image: A man crosses Pennsylvania Ave., NW, in front of the Justice Department, in Washington on Oct. 17, 2013, the first day back to work for furloughed federal workers (AP/Cliff Owen).