Government Wages Lag, IRS Drops Facial Recognition and the Fight for Tech Jobs

All right, it's Friday and you know what that means. It's time for GovTech's In Case You Missed It. Joined again by Joe Morris, Jed Presgrove, the gang is back as we're going to dive into some of the top reads of this week. We're going to look at the growing government wage gap and what this means as we think about the future of work. We're going to talk about the rise of regulatory sandboxes and maybe the rise of a new state tech capital, and then also look at the IRS move to backtrack from facial recognition as a form of interaction. But first, let me tell you a little bit about 2022's Beyond the Beltway. It's a virtual event coming up soon. Make sure you register for this. This is our annual event. It brings together our best analysts and government leaders to share their insights. And this year's speakers list is a who's who of CIOs and CTOs. Both Joe and I will be there, so you don't wanna miss out. You can visit events.govtech.com for more information. All right, now let's dive into our big topic of the week, competition, competition, competition. Government is competing with the private sector for workers, and states are competing with each other for the coveted high-paying tech jobs. First, let's take a look at Pew Research that was recently published. And according to Pew, private-public growth, uh, or private pay growth is exceeding state and local governments by the largest margin on record. In other words, employees of private employers are enjoying higher pay bumps than their government counterparts. Joe, it seems like everyone is struggling to hire right now. So what should state and local government agencies do to attract new tech talent?

Yeah, you know, I think first it's such an interesting piece to look at. Workforce has been the big topic, particularly of the latter half of last year and into this year. To make matters worse, not only are they not keeping up, obviously with inflation on the rise, uh, the study also found out that they're not even keeping pace with, uh, with high inflation. So a lot of concerns across state and local government. As far as what they could or should do, I mean, the article does talk a little bit about some of those strategies, whether that is looking at those pay increases, further steps to improve work environments, offering more flexibility for remote work, which is something that we've talked about a lot on past episodes. But it's also looking at some of those, those roles, right? Cybersecurity, IT roles. What can they do outside of just wages? Obviously, that has to be part of it, but beyond that, to compete with the private sector holistically?

Yeah, I think this is definitely an opportunity to rethink employment as well. I mean, you know, we've seen this trend even prior to the pandemic where there was a gap that was growing between the number of job postings and the number of employees that were actually applying for them. And that gap was continuing to widen, you know, not to consider and count in the fact that we've seen significant increases in private sector pay. I mean, Amazon recently announced it's doubling its salary cap to $350,000 for US-based white-collar employees. So tough salary to compete with on the public sector side, but definitely something that's gonna require a new approach. So, you know, I think when we look at employment, we also have to look beyond just the traditional W-2 and beyond even the contractor model that we've seen in the past. Maybe there's a little bit of a rise of shared positions or shared services around managed positions in government. Jed, what do you, what do you think about all this craziness?

I do think the remote work piece is going to be potentially important here. You know, one thing it kind of raises the question again of not just remote work, like workers that are in the state or in the local area where the government actually is, but it raises the question of should they start hiring remote workers outside of, you know, outside of the state? Like, should a state government in Alabama Uh, potentially hire someone who lives in Iowa, for example. So I think that question is going to come back up. I do think the, the signing bonus idea, uh, could have some merit. But, you know, the one thing with the, the budget here that's going to be an issue is that, you know, this article talks a little bit about that. It talks about how states and local areas have this influx of federal dollars, and so maybe that can help out with this issue. But the idea, though, the The cautionary part of this is that that's just one-time funds. So it raises the question of how can we make this sort of thing sustainable?

Thankfully, there are some federal funds out there in the American Rescue Plan Act around public sector wages that could help maybe ease some of this pain. But I had it actually mentioned to me yesterday in the call, this isn't the great resignation, this is the great upgrade. And I think that upgrade part, places some challenge on the public sector as maybe tech workers or others begin to look at the private sector to keep pace with wages.

All right, well, let's explore another side of this story. States are also competing against each other for those coveted high-paying tech jobs. 2 stories from GovTech this week highlight that. The first story poses the question, will Texas steal California's title of the US tech capital? And the other story we'll talk about in a moment is around North Carolina creating a regulatory sandbox. But let's dive into this one first. I mean, it's been interesting to see technology becoming a form of economic development. There's no shortage of states competing with other states for tech talent, but Texas is definitely making strides here. Joe, any thoughts on this? I mean, I've been trying to get Joe to move to Texas as a part of this, but have been unsuccessful up to this point.

That's where I was going to start. I was going to start with your personal efforts to get me relocated to Texas. I don't know if this would be overstated or not. I think that while we've seen some companies move and headquarters to Texas, that this large migration may be somewhat overstated. I think, you know, San Francisco and some of those other tech hubs will likely still remain an innovation tech hub going forward. And certainly, you know, remote work is a, is a challenge to that, but that's a challenge that impacts New York City, it impacts Austin, it impacts San Francisco, and everywhere as people look for maybe lower-cost places to live while maximizing their earnings.

Jed, your thoughts on this one?

You know, I can certainly see the possibility for California losing significant foothold in the industry. It's all about what inflation is going to do over the next couple years, and then also, you know, what the cost of living overall in California, what that's going to look like. I do know, living in California right now, just personally, I don't know how long I'm going to be in the state. You know, just to be honest with everyone, I just don't know because of the, the financial part of it. So if I'm feeling that kind of pressure, I can just imagine what a company might be feeling, especially when they look at some of these trends, you know, the trend going toward Texas, you know. And this is also really interesting because, you know, as you guys know, California and Texas have a classic rivalry. You know, when I moved over here to California 3 years ago from Mississippi, I was expecting there to be a little bit more commentary about other states in the South, you know, certain stereotypical notions about you know, how Californians might view Southerners. But I never really— I haven't really run into that. But the one state that keeps coming up here in California is Texas. Californians are very, very aware of Texas. And so this is that classic rivalry. That's what makes it interesting. But I'm kind of, you know, I definitely see where Joe is coming from. Maybe it is kind of overstated right now. This is sort of like a wait-and-see type of thing. Let's see where we are in 5 years, and then we might have a better grip on what the answer is going to be.

5 years from now, Jed and Joe will be living in Austin, Texas, so we'll see what happens there. All right, let's move on to our next piece of this, and that's where we talk about, you know, when you think about tech capitals, part of being a tech capital is attracting talent, but it's also creating the right regulatory environment for new tech to emerge. So this was a great piece out of GovTech to talk about a North Carolina law that created a regulatory sandbox for tech companies to kind of come in. And I know this, you know, stood out as one of our top reads of the week. Joe, why is this such a critical thing right now?

To me, this is the story that caught my attention. I think I'm a big fan of creating these environments, these sandboxes for new innovation to come in. In fact, I remember reading an article very similar to this out of North Carolina years ago where they created an innovation fund within government to do something very similar, to test new technologies for the public sector. So it's interesting to see these patterns kind of emerge that you maybe have a an elected official body that's really paying attention to emerging tech into these regulations. And to your earlier point on economic development, it's freeing up these regulations that allow innovation to be spurred, whether that's in North Carolina, Texas, or California or elsewhere. So to me, it's removing some of these barriers that can encourage new things to happen, new companies to come into play.

Yeah, I think it's a good point. I mean, you look at the past emerging technologies that have rolled out like Uber and even, you know, Airbnb to a certain extent, and they all kind of bumped up against the existing regulatory environment. There weren't these regulatory sandboxes that were in place. So of course there was a mismatch and agencies didn't know how to respond. Some banned the technologies and created, you know, kind of suppressed economic development opportunities. Some went all in and, you know, looked at doing that. But I think as we look at new technology, it creates new use cases and then they don't always fit into the existing regulatory construct that we have. So we have to think differently. So this is great to see kind of this sandbox methodology that we've seen a few times pop up over the years. This is now, you know, a really good exciting example at a state level that will follow. Jed, what do you think of this?

Well, I think back to some of the conversations I've had with different experts in the drone industry about, you know, the industry's fear of basically different regulations everywhere, and you don't know, you know, what you can do from one state to the other. And then of course that does have to make them a bit you know, reluctant to try new things. So this is— I think this is really good for technologies like that, technologies that we really don't know a lot about. And, you know, you want to ease— you want to ease the minds of the companies so they can try new things. And so they don't have to worry about, you know, the red tape and everything like that. So definitely a good idea. Now, whether this type of thing plays into the whole you know, tech industry leaving California thing. I, you know, I don't know if it— I don't know if it really is going to make that kind of impact. I still have questions about that, but I do think it's a good idea.

All right, and lastly, we are entering the season that is tax season, and while everyone is wondering what they were going to have to pay to the IRS this year, the IRS announced it planned on using facial recognition software to help verify individuals in an effort to speed up tax filing. access to tax records and a lot more. It signed an $86 million deal with ID.me to make it happen, but the agency recently kind of walked back from its plans after pushback from some lawmakers and privacy groups. What do you think about this? I mean, is this a— is this the end of facial recognition for these types of use cases, or what do you make of this, Joe?

So, you know what's fascinating about this? We did a survey at the Center for Digital Government years ago that asked US residents, were they willing to go through additional steps if it meant that they could keep their tax returns safe? Because if you remember, there was this big wave of going to file your tax return, you find out someone already filed it for you and has taken your tax return. And overwhelmingly they said yes, but this wasn't it. This was a hard pass, I think, for many people. It makes people very uncomfortable to understand not only what it could be used for, but there were other avenues that they could have gone down. We were talking in the pre-show, Jed talked about multifactor authentication, many other things, email. that they could have done, and I think those options probably could have been explored before they got to facial recognition.

Yeah, email is definitely one, you know, you've got fax and you got physical mail, so email is definitely one way to kind of fast-track your ability to communicate, but I mean, I think as we look at these emerging technologies, this goes the way of the risk of not understanding them, right, when it comes to things like algorithmic government, right, and the ability to use algorithms to make decisions, if there's a lack of understanding and a lack of foresight in how those technologies are regulated, that creates an issue because our natural inclination is to not trust it. So then we push back and we ultimately don't use it. So there are some, you know, benefits to some of these emerging technologies going forward, but I think this is a lesson of making sure that those use cases are clearly communicated and that the public buys into them and that you don't just roll it out without, you know, talking about how the data is going to be used, why you chose that particular mechanism as a form of security over other things. So a lot to kind of learn from this failed Jed, what are your thoughts on this?

When I first saw the story, I guess it was a couple of weeks ago, that the IRS was going to require people who use the online system to go through facial recognition, I honestly just couldn't believe it. I was like, why are they doing this? Because to Joe's point earlier, you know, you can just do multi-factor authentication. Why not just do that? Um, so that, that was, that was my thought initially. Now seeing this new story, IRS backing off, Obviously, I think that's the right move here. But on top of that, though, it does raise my curiosity. In other words, they backed off of it very, very easily. You know, there wasn't much of a fight at all. And so it just makes me wonder why they even went with it in the first place. You know, did they ever really think it was that necessary in the first place? Or was this just someone's idea? You know, someone up top and they just wanted to play with a new toy or something? That's what it seems like at this point, given they backed off so far. I realize that's speculation, but That's just what my thought was when I saw this story.

Jed, you're pulling no punches coming right for the IRS.

Well, I've already gotten my tax returns, so I feel like I'm okay right now.

That's right. We'll make Jed's address available to the IRS on demand.

Perfect. I think that, you know, we've got an upcoming event coming up here in a couple of weeks. Where we wanted to talk to you all about all the changes and dynamics that are happening across the GovTech sector. We kind of gave you a brief introduction to GovTech's App Store moment on an earlier episode. We want to detail what that is and how it can drive your success in this market and what you need to know about it to really be successful in 2022. So join us February 22nd. Dustin and I will be walking through GovTech's App Store moment. We hope you can join us. With that said, that brings us to the end of today's episode. We hope that you enjoyed our insights on the week that was in GovTech, and we expect to see and hope to see you Next Friday at 12 o'clock Pacific for more GovTech news and insights.