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What’s MA’s Job-Growth Strategy: Hoping, Hunting, or Helping?

 

By: Mike Hruby – August, 2011

On Thursday, July 21st, the Massachusetts Executive Office of Labor and Workforce Development (EOLWD) announced that our state unemployment measure stayed at 7.6% for another month. This signaled no improvement for 263,800 unemployed individuals, more than seven full Fenway Parks.

By definition the 7.6% figure does not include discouraged workers, nor workers who want to work but face a temporary barrier such as transportation or health. Nor does the 7.6% unemployment figure include those working part time who want to work full time, nor those working well below their capabilities, nor those missed by statistical methodology, nor those who just graduated from college or high school and want work. The 7.6% measure counts none of these individuals. Massachusetts has a lot more job seekers than publicly acknowledged.

New Jobs for Massachusetts, Inc., the pro-job-growth advocacy group I lead (website www.newmassjobs.com), estimates that one million people in Massachusetts are looking for work, or looking for more work, or looking for significantly better work. One million people out of a workforce of 3.5 million is a job-seeking rate of 28%. This one million number is what our state leaders should pay attention to.

The million people add up this way: 300,000 want work and have none. 600,000 are working but want more work (switching from part time to full time) or better work (moving back to the level they were at before 2009) or are working in the grey market (unreported work). We graduated 92,000 college seniors in June, along with 10,000 high school students who plan not to go to college. Add up those four categories, and you get more than a million people who want new jobs.

What are our state leaders doing about these million new jobs?

As reported in the July 21st State House News article, Joanne Goldstein, head of the EOLWD, expressed that she’s “hopeful” that large employers State Street and Baystate Health, whose major layoffs she referenced, will recover. She must know that large employers in finance and health care are facing massive cost-reduction pressures flowing from the national-level restructurings of ObamaCare and the Dodd-Frank bill. Healthcare and finance giants will not be growing organically any time soon. Is our job-growth strategy one of hoping?

Back in March, Governor Patrick traveled to Israel and the UK looking to bring back jobs. He got promises of 50. In April, Senate President Therese Murray headed for Scandinavia, looking to bring back jobs. Is our strategy one of hunting for jobs to bring home?

It’s hard to tell what our leaders’ job-growth strategy is since they don’t go out every week in search of new jobs.

Actually, it’s wise that they don’t go job hunting. Massachusetts compares poorly with other states as a place to start or grow a business. As detailed on our website, newmassjobs.com, Massachusetts is 43rd most friendly to business, has the 5th highest corporate tax rate, the 2nd highest level of state regulation, the 6th or 7th highest electricity costs, ranks 47th in personal freedom, and has the 6th highest level of taxpayer burden. We’re not a new-jobs magnet.

Dragging companies in from out-of-state produces small-scale results. A 2010 study by Boston’s Pioneer Institute looked in detail at the sources of jobs in Mass from 1990 to 2007. Pioneer’s economists studied the birth, growth, decline, and death of firms. The study also looked at in- and out-migration of companies, those moving into and out of the Bay State.

Pioneer showed that in- and out-migration affect job growth and job loss by 1%. State leaders should discard the hunting strategy.

Pioneer stated the job-growth challenge very clearly. “An environment that improves the health of our ‘homegrown’ businesses’ will have a much greater impact than policies that are designed to get companies to relocate to Massachusetts.” The primary mechanisms for job growth in Massachusetts, Pioneer said, are the rate new companies start up, their size at start up, the rate they grow, and the rate they encounter difficulties, decline and die.

In-migration makes nice headlines, like Wegman’s recent announcement of its new store in Northborough, but such movements will not provide a million new jobs. Instead, start-ups by entrepreneurs, innovation-based expansion, and fewer businesses closing will be the three deciding factors. Serious state leaders must focus on helping jobs grow right here, in Massachusetts.

Can our state leaders help? Yes, here are five concrete steps.

First, prioritize by helping jobs grow in the shortest amount of time for the largest groups of people having the most need. In August of 2011, that means passing simple legislation that will immediately help entrance or re-entrance to the labor force by workers over 50, workers under 25, the unemployed and under-employed, plus urban teens.

Second, normalize our state’s Independent Contractor Rule (ICR) so it matches the Federal IRS guidelines. This change will help individuals quickly find work or start small service businesses. Massachusetts’ ICR is the worst in the country. An ICR fix will help scores of professionals and tradesmen and women do project-oriented work, hire project workers, add peak capacity, and help part-time professionals expand their workweeks by filling irregular and occasional needs.

Third, eliminate the inventory tax for manufacturers and distributors. The formal description of this tax is portion of the Massachusetts Business Tangible Property Tax applied to inventory. This tax is driving all our new manufacturing and distribution jobs out of state. Only nine states still have this tax. We’re one of the nine laggards.

Fourth, reduce the minimum health care premium to $50 monthly for major medical coverage and discount drug coverage. Michigan and California both do this now. This change will allow individuals and businesses to buy the most important class of coverage at low cost and thereby will allow hiring for new jobs to accelerate.

Fifth, eliminate the teen minimum wage completely, an act of pure compassion. This law has made honest work impossible in the inner cities. With honest work impossible, kids turn to dishonest work, usually involving guns, drugs, sex and crime.

The job-growth impacts of these five steps will be immediate, widespread, and long-lasting.

Massachusetts is an inventive, hard-working and compassionate state. Our state leaders can help by allowing our normal job creation processes to put all one million of us back to work.

Mike Hruby is President of New Jobs for Massachusetts, Inc., a non-profit, non-partisan, pro-jobs-growth advocacy group. You can visit New Jobs at newmassjobs.com or follow Mike on Twitter @venturemike1, or email him at mike@newmassjobs.com. New Jobs is supported by contributions from individuals and corporations. All donors and their contributions are kept private. IRS regulations do not allow contributions to be deducted for tax purposes.

 

ValleyPatriot

ValleyPatriot

The Valley Patriot is a free monthly print newspaper serving Northern Massachusetts, and Southern New Hampshire. The print edition is published by the 10th of each month and is distributed to 51 cities and towns.

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