economic development – Page 3

Making Connections Visible

Part of the reason American policy debates are so unsatisfactory is that they tend to be conducted in “silos”–with little or no recognition of how Policy A might affect issues B and C. This is particularly true of arguments about raising the minimum wage, which tend to focus exclusively on assertions that jobs will be lost and consumer prices will rise.

As cities have ignored those assertions and raised their minimum wages, data has emerged to dispel those concerns. According to economists at the University of California, Berkeley, who studied nine cities that raised the minimum wage in the past decade, higher wages have virtually no effect on employment; only restaurants, with their higher-than-average concentrations of low-wage workers, raised prices, but those raises were trivial.

What this wage discussion consistently misses is the fact that the effects of worker pay go far beyond job numbers and the pros and cons of an extra nickel for a Big Mac.

There is research, for example, suggesting that economic insecurity increases domestic violence and other criminal activity, and contributes to social discord generally. But the effect on our communities doesn’t stop there.

Economic development professionals spend their days trying to lure new employers to their cities and towns, and they are acutely aware of what those prospects look for when they are seeking a new location: an educated workforce and good schools, decent roads and public transportation to get workers and customers to and from their place of business, infrastructure (sewers, etc.) adequate for their particular needs, and more generally, an appealing “quality of life.”

Those community assets are supported by tax revenues. Poorly paid workers pay very little in taxes, of course, but that is a relatively minor part of the problem.

When large numbers of workers in an area are underpaid, when they make wages that barely allow them to subsist, they lack the means to purchase any but the most essential goods and services. Overall demand drops. When demand is weak, businesses suffer. (They also don’t need–or hire–more workers.) When the business’ bottom line declines, so do tax revenues.

Anyone who works for municipal government understands the dilemma: how do we stretch declining revenues? Hire fewer police and firemen? Fail to fill potholes and board up vacant buildings In neighborhoods? Grow classroom sizes? Collect garbage less frequently?

Declining revenues, blighted neighborhoods, fewer city services and a lower quality of life don’t attract new businesses. Economic development stalls.

The American economy depends upon consumption. I happen to think there are a number of unfortunate consequences of that economic model, but it is what we have. When significant numbers of residents in a city or town aren’t being paid enough to allow them to consume, the consequences go far beyond their kitchen tables.

As Kevin Drum has written, in an article for Mother Jones,

Obviously, there’s a limit to how high you can raise the minimum wage without harming the economy, but evidence suggests we’re nowhere close to that tipping point. The ratio between the United States’ minimum wage and its median wage has been slipping for years—it’s now far lower than in the rest of the developed world. Even after San Francisco increases its minimum wage to $15 next year, it will still amount to just 46 percent of the median wage, putting the city well within the normal historical range.

The bigger threat to the economy may come from not raising the minimum wage. Even Wall Street analysts agree that our ever-widening income inequality threatens to dampen economic growth. And according to a new study by the UC-Berkeley Labor Center, it’s the taxpayers who ultimately pick up the tab for low wages, because the federal government subsidizes the working poor through social-service programs to the tune of $153 billion a year.

How many public school teachers and police officers could we pay, how many streets could we pave, how many parks could we maintain with $153 billion dollars a year…

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Numbers Can Be Deceiving

Well, the Orange One has delivered a “major” speech on the economy. As usual, very little he said is remotely accurate; here’s just one example from a Time Magazine article deconstructing those claims:

Trump’s claim that one-in-five American households “do not have a single member in the labor force” is also therefore not a reflection of employment problems so much as it’s a recognition that 20% of American households are headed by retirees. Your 85-year-old grandfather and his 82-year-old wife aren’t participating in the labor force—and that’s probably a good thing.

Because we Americans have a tenuous grasp of economics, politicians often feel free to play with the numbers. That’s nothing new (although Trump does take misinformation to a whole new level…)

Last May, the website of the Indiana Institute for Working Families had a discussion of unemployment numbers that explained what those numbers do–and do not–reveal about the health of a state’s economy. Since we are in the middle of a campaign season in which Trump and other candidates will continue to take liberties with those numbers, it is worth revisiting that explanation.

The post itself was triggered by a seemingly rosy employment report: more Hoosiers were working, and the workforce was nearing an all-time high. Good news, right?

Well, as the policy analyst explained, “all that glitters is not gold.” Among the reasons for caution is something called the Labor Force Participation Rate.

it’s also important to look at the Labor Force Participation Ratio (LFPR)—the ratio of the civilian labor force to the total non-institutionalized civilian population 16 years and older—as a useful tool in determining the overall health of the labor market. A low LFPR means there is slack in the labor market, which puts downward pressure on wages, and holds back growth in household incomes.

In layman’s language, the LFPR means that a decline in the unemployment rate can be explained, at least to some extent, by the number of Hoosiers leaving the labor force. That’s because workers are only counted in the unemployment rate if they are actively seeking work. But the workforce dropout rate isn’t the whole story either.

That brings us to the third and final point, which helps to illustrate declining LFPR; while the state is reaching employment levels (total nonfarm employment) not seen since the summer of 2000, the population of adults in Indiana (16+) has grown by more than a half-million during that time period. In other words, Indiana has added jobs, but not nearly enough to keep up with population growth.

Worse yet, the jobs that the state is adding are low-paying jobs. A recent report from the Indy Star – Economic Gaps Growing Among Hoosiers – encapsulates the conundrum that is the state’s insistence on low road growth strategies: “As the state economy grows and state leaders say pro-business policies have created more than 57,000 new jobs last year alone, poverty is on the rise. That’s right. More jobs, yet more poverty.”

Remember ALICE?

It’s always useful to consider what the statistics tell us–and how the real story differs from the snake-oil on offer.

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The Art of Economic Development

My husband and I just spent a couple of days in Asheville, N.C. We’ve previously visited the city, and are periodically drawn back by its thriving arts community.

Because we are old city hall types, when we travel, we tend to look for indicators of social and civic health that might not interest other visitors: are there empty store-fronts in the central core? How’s public transportation? Are there people “out and about”? Is there a good mix of housing and retail activity in the downtown (Jane Jacobs’ “eyes on the street”), or is the urban core dominated by banks and law offices?

Asheville is a fascinating place for a number of reasons. According to my friend Google, it’s about a third the size of Indianapolis. It has the worst mess of Interstate highways I’ve ever seen slicing into neighborhoods and districts, but its small downtown was vibrant. What struck us was the nature of the shops, cafes and restaurants populating the urban center: virtually all of them were local. Unlike the many interchangeable places we visit, authentic mom-and-pop enterprises haven’t been crowded out by the predictable Gaps, Pottery Barns and Starbucks.

Mr. Google wasn’t as helpful when I tried to figure out why these local entrepreneurs were thriving in Asheville, despite their waning numbers in so many other locations. But I did find this nugget on a municipal website that might explain why support for the arts seems to have taken a central place in Asheville’s economic development strategy:

Statewide, the nonprofit arts and culture industry generates $1.2 billion in direct economic activity in North Carolina, supporting more than 43,600 full-time equivalent jobs and generating $119 million in revenue for local governments and the State of North Carolina.

“We all understand and appreciate the intrinsic values of the arts. This study shows that arts organizations are also businesses. They employ people locally, purchase goods and services from within the community, are members of the chamber of commerce and local convention and visitor bureau’s and are key participants in marketing their cities and regions,” said Wayne Martin, executive director of the N.C. Arts Council.

“Because arts organizations are strongly rooted in their community the jobs they provide are, on the whole, local and cannot be shipped overseas,” Martin added.

It would be interesting to know which came first, the arts community or the strategy; it would also be interesting to know whether Asheville offers financing for small, local businesses; the preference of bankers for chains and large enterprises with significant assets and proven track records is often cited as a reason start-ups have such a hard time starting up.

With or without financing incentives, however, it was clear to us that Asheville’s decision to focus on the arts was a savvy one. The city hosts a variety of art festivals that draw lots of tourists, it is using art as a tool for redeveloping a dilapidated riverfront district, and a number of the galleries, cafes and shops in the downtown area were clearly geared toward “artsy” folks. That was true even of the local restaurants we tried–they were excellent, and as innovative as those in much larger, “foodie” cities.

Other observations, in no particular order: young people were everywhere–and overwhelmingly white. (Despite Asheville’s considerable merits, diversity appears to be lacking.) Most shops emphasized that goods were local, or if not, were “fair trade.” Being Green also seemed important. I saw more bookstores (independent!) in a few square blocks than I’ve seen in a long time (hope they last in this electronic age…). I’ve been stopped on the street by religious proselytizers in a number of cities, but in Asheville, the guy was a self-professed Buddhist monk, and that was a new experience.

All in all, a quirky, interesting place–not just another “mall-ified” stop on the highway.

There are some lessons there….

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Political Party Values

I got an email telling me that the Indiana Republican Party is holding a fundraiser to which I am invited. The featured speaker will be Wisconsin Governor Scott Walker, and whoever wrote the email clearly anticipated great excitement on the part of its recipients. Generally, when a political party highlights one of its own at such an event, it is because that person represents success as the party defines it.

So–how is Walker, who triggered some of the most acrimonious protests in Wisconsin history, performing?

Well, the latest data from the Federal Reserve Bank of Philadelphia paints a rather grim picture for Wisconsin under Governor Walker.

Not only is Wisconsin one of only five states whose economy is expected to contract over the next six months, but it’s 49th out of 50. Only Wyoming is worse. The state ranks 44th in private sector job growth, and 5th worst in wage erosion.

For a governor who bragged about stealing Illinois’ jobs after their the state to Wisconsin’s south raised taxes, it must be embarrassing that Illinois is far outpacing it economically. In fact, Illinois is projected to be in the top 10 over the next six months. (On the other hand, I have the impression that Scott Walker rarely allows reality to embarrass him–or even make contact.)

Interestingly, every state with a projected economic contraction in the study is headed by a Republican, and every one of the bottom 10 is GOP governed.

Given this level of performance, one might be forgiven for wondering why Walker was chosen to headline the Indiana GOP dinner. Might it be that today’s Republicans value sticking it to unions and public employees more than they value actual economic growth?

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What Would I Do Without Texas?

As I have noted several times, I owe Texas a debt of gratitude. Whenever I am searching for an example of bad public policy to use in class, the Lone Star State comes through for me.

I thought about Texas’ reliability during a research presentation by one of the teams of students in my graduate Law and Public Affairs class. They had chosen Cap and Trade as the policy proposal they were analyzing, and they began the presentation with a brief history of environmental regulation in the U.S. The student delivering that portion of the presentation noted that federal rules were a response to a couple of the downsides of our federalist system: not only is there often a lack of uniformity, but there are some unfortunate consequences to the fact that states compete with each other to lure businesses and jobs. Before the establishment of the EPA, lack of environmental regulations was one of the “advantages” states offered relocation prospects–“come to our state, and you won’t be bothered by pesky rules keeping you from discharging your toxins in that nearby river.”

Even today, some states allow more pollution than others. According to the student researchers, Indiana is the 7th most polluted state in the country.

Texas, of course, is the worst.

Indeed, Texas Governor Rick Perry has been widely quoted touting his philosophy of economic development, which boils down to: states wanting to entice business can succeed by reducing or eliminating regulations.

So what if a few fertilizer plants blow up and level some neighborhoods? So what if polluted air exacerbates asthma and other medical conditions, sickening citizens and driving up medical costs? So what if the companies most likely to be attracted by an absence of regulation are those looking to evade reasonable standards for safety and environmental compliance?

Diminished health and safety is a small price to pay for job creation bragging rights. Just ask Rick Perry.

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