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

Aging bridges ignored at our peril

Rep. Sue Minter, who represents Waterbury, Duxbury, Huntington & Buels Gore, is a member of Vermont's House Transportation Committee. Her Op Ed in the Sunday Times Argus calls attention to reality that, "In the face of state budget shortfalls, the Douglas administration has chosen to delay transportation repair projects all around the state":

I wish I could say that I was surprised by the deadly bridge collapse in Minnesota last week. But with what I know about Vermont's infrastructure woes, I knew a major failure like this was only a matter of time. I only hope that this terrible tragedy will serve as a wake-up call here in Vermont and around the country. As a state and as a nation we are not adequately addressing our infrastructure needs. We ignore this problem at our peril.

When I was appointed to serve on the House Transportation Committee three years ago as a new legislator, I was shocked by what I learned about the under-funded and aging transportation system that I had become responsible for overseeing.

Read more...

Jim = McJobs

From VT Democratic Party newsletter

Last week, the governor grabbed a pair of giant scissors and snipped the ribbon at the McDonald's in Barre. Though we realize it's just one unfortunate ribbon in a long line that have met the same fate, and that we all like to indulge in a little fast food every once in a while, this particular ribbon cutting exposed a few inconvenient truths about Jim Douglas and his record as governor.

1. When the governor told Vermonters "Jim = Jobs," is this what he had in mind? Yesterday, the governor said McDonald's "provides dozens of jobs." True. But when he promised jobs to Vermonters, we suspect most assumed he meant better, higher paying jobs. As it turns out, however, since June 2003, shortly after "Jim = Jobs" took the helm of state government, the state has lost 1,750 high paying manufacturing jobs, according to the Vermont Department of Labor. It's true that we've added jobs, but unfortunately they pay so poorly that Vermonters have to hold two or three of them to make a living.

2. While the governor promotes McJobs as the way to move Vermont forward, he is also promoting a food source that all Vermonters know is unhealthy. The McDonald's "Mighty Kids Meal" contains 800 calories and more than half the daily recommended amount of saturated fat for adults. According to a report by George Washington University, to burn those calories, an average 7-year-old girl would have to either walk for over 9 hours, play volleyball for over 8 hours, baseball for almost 7 hours, swim or play paddleball for about 5.5 hours or engage in aerobics for 5 hours. Is this what the governor had in mind when he promoted his "Fit and Healthy Kids" initiative?

Wasting Economic Development Resources

To the Burlington Free Press editor:

Sunday's article about Vermont Businesses for Social Responsibility ("Business group pushes for change", August 5, 2007) quoted the Secretary of Commerce on Vermont's tax credit program: "It's a critical program that returns money to the state."

The only way this misguided program can return money to the state is if the businesses would not have invested money or hired workers without the tax credits (the infamous "but for"). This is a fantasy.

Businesses expand when it makes sense financially, and tax credits (or cash rebates as is the case today) are not sufficient to overcome the business cycle. The evidence is clear: 1) few businesses apply during economic downturns; 2) dozens of companies awarded credits never met their job creation requirements; and 3) some companies that got credits cut jobs later on.

However, it's not surprising that businesses apply. If the state chooses to give away taxpayer money, why shouldn't they?

In the end, corporate taxes are not much of a burden (see the recent Tax Study by the Joint Fiscal Office). More importantly, tax credits are not long-term investments. I commend Vermont Businesses for Social Responsibility for calling for a more responsible approach. We need it. The current one isn't working.

Doug Hoffer

Wage Deficit, Not Skills Deficit

Times Argus letter published Jul 11, 2007
Don't blame the victims

The article, "One third of Vermont youth drop out of work force," gets it wrong, blaming the victims — working Vermonters — instead of low-road employers. The article quotes Mr. Stenger about "good-paying, open positions," but provides no facts to back up his assertions. You report that Rep. Kupersmith claims that "employers have the jobs, but Vermont lacks the trained workforce to take those positions."

The so-called "drifters" may take advantage of new training opportunities, but most simply need livable wage jobs. Many of us used to find such work in factories or the building trades. Although factory jobs have declined, and wages too, the building trades could still offer a decent life. However, anti-union campaigns and policies have succeeded in depressing wages. We now have major employers using the H2B program to bring in hundreds of aliens to work (what are now) low-wage construction jobs, while some of our skilled trades-people leave the state for better pay.

As for the departing college grads, they're following the money. Many professional jobs in Vermont pay less than in other states. Actually, if every adult in Vermont had a graduate degree, many would still leave because 40 percent of the jobs require nothing more than short-term on-the-job training.

About all those "good-paying open positions." Where are they? Most entry level jobs in Vermont for new college grads are not "good paying" compared to other areas (let alone jobs for those with skills other than a degree). Mr. Stenger may be referring to mid-level professional positions, but many of those jobs are filled by in-migrants from other states.

Wage problems faced by the working Vermonters do not come because we have skill deficits, or because of skill shortages that hamper our competitiveness. We have had rapid productivity growth for the last 10 years with the very same workers who now do not participate in economic growth. Moreover, it is hard to claim that the stagnant wages of college graduates and the failure of new college graduates to locate jobs with benefits is the result of deficient skills.

No, Vermont's workers do not face a "skills deficit," rather we face a deficit in the wages and benefits that employers provide. This gap between pay and productivity growth is the result of policies that shift bargaining power away from the vast majority of us and toward big employers: the steep drop in unionization rates; unfettered globalization and off-shoring that increasingly puts us in competition with workers around the world; economic deregulation and the privatization of government services; and escalating pay for CEOs.

Unless and until Vermont employers raise wages, the exodus will continue.

Traven Leyshon