Anemic Job Growth - New Policies Needed

Doug Hoffer comments on Monthly Jobs Report:

In the latest Dept. of Labor press release, the Commissioner stated, “job growth continues on its modest growth path [but] we continue to be concerned about recent downward trends in labor force and employment."

It's good that the Commissioner has acknowledged a problem. But a longer term perspective would lead one to characterize job growth as anemic, rather than modest. And it's not a recent trend. As the graph below makes clear, private sector job growth has been significantly lower in the last three years than in the 1990s. [Note: I focus on private sector job growth because state economic development policy is not directed to and has little impact on public sector jobs.]

Since the last recession, we've gained 7,700 private sector jobs. But 4,300 simply replace those lost during the recession, so it's a net gain of only 3,400 jobs in six years (and it appears we may be heading for another recession.

And while the Department's press release makes no mention of it, many of the jobs being created are low wage. For example, of the 4,200 net new private sector jobs since August 2004, 2,600 are in "health care and social assistance". While there are many good jobs in this industry, almost 4 out of 10 are in "social assistance" and "nursing and residential care facilities". The average wages in these two sectors in 2006 were $16,888 and $25,019 respectively.

Unfortunately, Vermont is not alone as the U.S. economy is experiencing similar problems, although Vermont's performance is considerably worse (since August 2004, U.S. private sector jobs increased 5.4% while Vermont has grown only 1.7%.

The point is that Vermont's economic development policies are not working. Perhaps that's not surprising since Vermont is so small and the forces at work are so large. But if the "tools" we're using are not sufficient to overcome those forces, why don't we look for new tools? At some point we have to ask the question: What are we getting for the tens of millions we spend each year on economic development?

Isn't it time to look objectively at all of our policies and programs and determine which are providing a good return on investment and which are not? And for those that are not performing, we should consider a range of alternatives. Only then can policy makers determine how to allocate our limited resources wisely.

Inequality Growing Faster in New England

Rich & Poor

Rutland Herald editorial: "...It is not an accident of nature that our economy has worsened the economic plight of a majority and enriched the very richest. It is how our policymakers have designed the system. The question is how much longer the majority will allow those policies to widen the gap between rich and poor." Read More...

"Between 1989, when inequality in the region was low, and 2004, inequality rose faster in New England than anywhere else according to a report by two economists from New Hampshire in a publication of the Federal Reserve Bank of Boston."

Truth & Taxes

On yesterday's "Vermont This Week" (9-7-07), Mr. Roper (chair of the VT GOP) said that "the biggest expense that Vermonters are facing right now is the cost of their taxes".

That is inaccurate. A simple calculation shows that for a median income family with a median priced home, state & local taxes represent about 6% of their household budget, while transportation, housing, and food are all more than 13% each and health care is another 10% (even assuming an employer contribution). [Note: Sales taxes were not calculated separately but are typically 1% - 2% of gross income).

Using data from the VT Tax Department, the net school tax would be about 2.4% of gross income; state income tax 1.9%; and non-education municipal tax 1.6% (avg. statewide). Although not insignificant, do these look like "the biggest expense that Vermonters are facing right now"?

Elected officials, candidates, and their spokespersons should be held to a high standard for accuracy and truth. And reporters should not simply allow such falsehoods to be repeated. Mr. Roper's statement should be corrected.

I suggest that VPT, WPTZ, and other major media outlets seriously consider a regular feature (especially during campaigns) that examines such statements and report when they are found to be inaccurate or misleading.

We expect elected officials, candidates, and their spokespersons to engage in spirited debates about the issues. But voters deserve to know the truth. Some might argue that rival campaigns should respond in such cases. But how are voters to know the difference between opinion and fact unless the media holds them accountable? With respect, I always thought that was part of the job.

Doug Hoffer

To the editor, Reformer:

Re. your recent article on the proposed income tax for education ("Income tax plan weighed; panel seeks to fund education system", Reformer Aug. 21, 2007).

The article quoted the Governor's spokesman Jason Gibbs saying that shifting to an income-based system would discourage businesses from relocating to Vermont, thereby "undermining Vermont's economic security."

It would be helpful if Mr. Gibbs would provide evidence to support that assertion. Other than self-serving anecdotes from certain business advocacy groups, there is no data to back up their claims. Indeed, the academic literature has found consistently that state taxes are a very small part of business costs and that they have little impact on location decisions.

Furthermore, an income tax for education would not be an additional tax; it would simply replace the property tax.

For those interested in the subject, I suggest you read Vol. 1 of the Tax Study published by the Joint Fiscal Office. On page 58, it shows that 46% of the largest multi-state and multi-national firms operating in VT paid only $250 in corporate taxes in 2003. Does that sound like a burden to you?

As for the personal income tax, much is made of the fact that Vermont has a high top marginal tax rate. But only 1% of all filers pay at that rate, which only kicks in for earnings over $336,550. I wish I had such problems.

Opinion is one thing, but when people make statements that purport to be factual and have no basis, that's just dissembling and demagoguery.

Doug Hoffer