Six-State Study Finds Industry Supporters Exaggerated Jobs Impact of Shale Drilling

By Chris Lilienthal, Third and State

Drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim. In fact, in Pennsylvania, shale-related employment accounted for less than half a percent of total nonfarm employment in 2012 (as the figure to the right shows).

These findings come from a new report released today by the Multi-State Shale Research Collaborative — a group of research organizations, including the Keystone Research Center and Pennsylvania Budget and Policy Center, tracking the impacts of shale drilling.

As Frank Mauro, Executive Director of the Fiscal Policy Institute in New York and one of the authors of the report put it: "Industry supporters have exaggerated the jobs impact in order to minimize or avoid altogether taxation, regulation, and even careful examination of shale drilling."

The Marcellus and Utica shale formations span six states: New York, Ohio, Pennsylvania, West Virginia, Maryland, and Virginia.

To be clear, shale drilling has created jobs, particularly in Pennsylvania and West Virginia, and cushioned some drilling-intensive areas in these states from the worst effects of the Great Recession and the weak recovery. The number of actual shale jobs created, however, is far below industry claims. Shale employment remains a small share of overall employment and has made little difference in job growth in any of the six states studied.

Natural gas development in these states from 2000 to 2008 was largely fueled by high commodity prices. As prices have declined more recently, gas drilling activity has slowed while development of higher-priced oil has accelerated.

Recent trends are consistent with the boom and bust pattern that has characterized extractive industries for decades. It also points to the need for state and local policymakers to collaborate to enact policies that serve the public interest.

You can check out the full report and press release here. We'll be back here next week with more findings from the report.

Cut to Federal Nutrition Assistance Impacts Families and Children in Every PA County

By Chris Lilienthal, Third and State

A major funding cut to the Supplemental Nutrition Assistance Program (SNAP) took effect November 1, impacting 1.8 million Pennsylvanians.

SNAP, formerly known as food stamps, is our nation’s first line of defense against hunger and a powerful tool to help keep families out of poverty. Benefits are modest, offering many Pennsylvania families a crucial bridge in this slow economic recovery.

The November 1 cut is the result of an expiring provision in the American Recovery and Reinvestment Act (ARRA) that temporarily boosted SNAP to strengthen the economy and ease hardship in the wake of the recession. The cut totals $5 billion nationwide for the remaining months of the federal fiscal year (November 2013-September 2014), including $183 million in Pennsylvania.

Nearly 66 cents of every dollar cut in Pennsylvania ($120 million) will reduce the benefits of households with children. Another 37 cents out of every dollar cut ($68 million) will reduce benefits for Pennsylvanians who are elderly or living with disabilities. Click here or on the map below to view how many people, households, and children are impacted by the cut to SNAP in each of Pennsylvania’s 67 counties.

PA County Map

In addition to helping to feed hungry families, SNAP is one of the fastest, most effective ways to spur the economy. Every $1 increase in SNAP benefits generates about $1.70 in economic activity. Benefits boost demand for farm produce, helping to keep our nation’s farms strong.

The cuts may force some Pennsylvanians to choose between food and other priorities. Ruth Vesa, a 78-year-old widow in Pittsburgh, said in August when the cuts were announced: “I’m very thankful for the food stamp program because it enables me to have good food to eat and not be worried about my medical prescriptions. Otherwise I would have to make a choice. Any cuts to the program would be hurtful to me personally.”

For a family of three, the cut will likely mean a reduction of $29 a month – $319 for the remaining 11 months of the fiscal year. This is a serious loss for families whose benefits, after this cut, will average less than $1.40 per person per meal. It is the equivalent of taking away 21 meals per month for a family of four or 16 meals for a family of three.

That’s the bad news. The even worse news is that additional cuts to SNAP could be on the way. In September, the U.S. House narrowly approved legislation that would cut $39 billion in SNAP funding over the next decade. The Senate has not taken up the bill.

If enacted, a cut that large would deny SNAP to approximately 3.8 million low-income people in 2014 and to an average of nearly 3 million people each year over the coming decade, according to Congressional Budget Office (CBO) estimates. Those who would be thrown off the program include many low-income children, seniors, and families that work for low wages.

More Fun With Shale Jobs Numbers

By Stephen Herzenberg, Third and State

Last week, the Marcellus Shale Coalition trumpeted a new claim on the shale drilling industry’s positive impact on Pennsylvania jobs:

Raymond James analysts crunched the numbers, and between 2005 and 2012 almost 90 percent of the job growth in Pennsylvania at that time came from oil and gas jobs … That’s the highest percentage of any state, according to analysts Pavel Molchanov and J. Marshall Adkins, who based the math off data from the Bureau of Labor Statistics.

As meaningless statistics go, this is one of the more meaningless.

Here’s why: Since 2005, many states, including Pennsylvania, have created few jobs overall. Pennsylvania averaged 5,704,000 jobs in the 12 months of 2005 versus 5,746,000 for the 12 months ending August 2013 – a 42,000 increase. Given this small increase in the overall number of jobs, it doesn’t take a lot of shale jobs to account for a high percentage of this increase. In other words, 90% sounds like a lot (leaving aside whether the 90% claim is even accurate), but 90% of a small number is, well, a small number.

This leads to two other points. First, why didn’t Raymond James pick 2006? In Pennsylvania, the 12-month job average in 2006 was 5,755,000 – MORE than the most recent 12-month average number of 5,746,000 jobs. Since 2006, Pennsylvania has had no positive job growth, which might lead one to say the Marcellus Shale created infinity percent of the total growth in jobs in Pennsylvania since that year. In fact, with no overall job growth, drilling would have created infinity percent of the total job growth even if it had created just one positive job.

These 2006 calculations help answer why Raymond James started its analysis in 2005: 2005 is far enough back for overall job growth in virtually every state to be positive but small. Starting in 2006 would make the shale shares of overall job growth nonsensical in many states, including Pennsylvania (since overall growth was negative). And going back to 2003 or 2004 would increase overall job growth relative to shale job growth, and begin to convey the reality that shale is a small part of the overall economy. Nice job of cherry picking the period of analysis to fuel a preconceived narrative, Raymond James.

The second point is that Pennsylvania’s high ranking for share of jobs coming from shale since 2005 stems partly from the state’s poor recent jobs performance. If Pennsylvania’s job growth since 2010 had kept pace with national job growth over the same period, we would have roughly another 100,000 jobs today. A higher number for overall job growth since 2010 – and hence since 2005 – would make the modest number of Marcellus Shale jobs created since 2005 substantially lower than 90%.

So in a strange way the Raymond James/Marcellus Shale Coalition claim about shale job growth since 2005 is partly a celebration of Pennsylvania’s disappointing overall job growth since 2010. Does the Marcellus Shale Coalition really mean to draw attention to this?

What’s At Stake for PA Schools in Property Tax Debate?

Michael Wood, Third and State

The latest proposal to eliminate property taxes in Pennsylvania would leave school districts with $2.6 billion less in overall funding within five years, according to an analysis from the Pennsylvania Independent Fiscal Office. Matthew Knittel of the IFO presented the findings during a Pennsylvania Senate Finance Committee hearing Tuesday.

The plan – proposed in both HB 76 and SB 76 – would swap school property taxes for higher state income and sales taxes, largely on individuals. The IFO, which did not take a position on the bill, compared what could be expected from the new mix of state funding to projected property tax revenue over time and tallied the fiscal impact on school districts and state government.

Much like with previous versions of this property tax plan, the numbers don’t add up. The IFO projects school districts would receive $112 million less in funding than they would have received from property taxes in 2014-15, which grows to $2.6 billion by 2018-19

The reason is fairly simple. The bills place an artificial limit (the lower of sales tax growth or rate of inflation) on how much in new income and sales tax dollars go to school districts to replace lost property taxes in future years. This is true even if those state tax collections exceed the caps, as they likely would in most years. The bill does not address how schools are to pay for increasing pension obligations, let alone costs for health care, supplies, or utilities that may increase in price faster than inflation.

Like all tax swaps, this one picks winners and losers – with Pennsylvania’s school students and the state’s future among the biggest losers.

Corporations, which pay about 30% of all property taxes and are among the largest taxpayers in many districts, would come out as big winners. Their school property taxes would be eliminated, but unlike individuals or small businesses, corporations would pay no more in state taxes. Instead, their share of school funding would be shifted to individuals and small business owners who pay income taxes and consumers who pay sales tax. (Many goods and services purchased by businesses would remain exempt from the state sales tax under this plan).

Renters, including many seniors, would see higher sales tax and income tax bills, but little “relief” in the form of lower rent payments. For low-income families, this plan is Robin Hood in reverse, with poor renters paying higher taxes to subsidize tax cuts for wealthy property owners.

For non-elderly homeowners, it’s a mixed bag. Homeowners would see their local property taxes decline, but their state income taxes would rise. Many homeowners would also see their federal taxes increase, as they would lose a deduction for paying property taxes.

Many school districts have already adopted earned income taxes to reduce dependence on property taxes. Taxpayers in those districts would pay increased state taxes to subsidize property tax cuts in other parts of the state.

The change could make houses in Pennsylvania less affordable in the future. When California adopted property tax limits, it saw housing prices skyrocket. 

Many seniors and people with medical conditions would have to pay sales tax on an array of health care goods and services.

Finally, schools would receive much less than they need to help students succeed. Good schools are the lifeblood of a community and its economy. If we shortchange our schools, how will Pennsylvania ever prepare better workers for tomorrow’s economy or attract and retain businesses that need skilled workers?

Paying property taxes are a real problem for some homeowners and in some specific areas of the state. We should address those concerns with targeted reforms rather than a one-size-fits-all approach that has been adopted nowhere else in the nation. Some of the reform efforts, like Act 1 of 2006, have helped moderate property tax growth – and the IFO report reflects that. Many districts have adopted earned income taxes to lessen reliance on property taxes.

The most effective way to ease Pennsylvania’s over-reliance on local sources for school funding is to increase the state’s support of education. Pennsylvania trails most states in state funding for schools, creating tremendous inequities across districts. A good education should not depend on where a child lives. The state needs to make – and keep – a commitment to provide a larger share of school funding. That is the key to a healthier economy and a better Pennsylvania.

‘This Is What the Middle Class Looks Like’

By Stephen Herzenberg, Third and State

“This is what democracy looks like.” Even though this chant originated with the Seattle protests against the World Trade Organization (WTO), which haven’t yet led to major reforms, the phrase nonetheless captures the idea of a social movement that has crystallized its demands and has a better chance to succeed because of it. Other examples include the right to vote in the civil rights movement, or the fight to legalize gay marriage, a simple modern demand that culminates a fight for equality in all its dimensions.

One challenge in the U.S. fight for economic justice since inequality began to yawn wider in the 1970s has been the lack of a simple demand that either working people or elites thought could bring back the middle class. Having such a demand fuels social movements because it gives members of the movement confidence – conviction – that there is a way for the world to give them what they want. It also fuels social movements because it gives the broader society a way to let the protesters get a win.

The fast food workers engaging in one-day strikes across the country may be on the verge of crystallizing a simple demand to which their low-wage employers could accede – and, in the process, cracking the code to the next U.S. middle class.

Today’s story on these strikes in The New York Times says that the organizers aren’t actually clear yet on the path to victory. The demand is a $15-per-hour wage – a ticket to the middle class. But will progress result from a higher minimum wage, local living wage requirements for big chains, or companies themselves raising wages to get off the front page? (This is where you say in your best pompous pundit voice, “Well, ah, um, cough, good question.”)

Because these protesters have a practical, confident vision of the end point they want – an economy that pays lower-wage workers a middle-class wage (so what if Big Macs cost 50 cents more) – they have a good chance of finding the mechanism that can get them there and keep them there (or forcing the rest of us to figure out the mechanism).

I think the mechanism is pretty simple – it’s a union of all fast food workers in a metro area, across multiple companies. It would borrow heavily from building trades union models, such as electricians and carpenters. It would set area-wide wages, $15 an hour to start, as well as establish multi-employer health and pension plans. Most of the basic institutional solutions here were anticipated by SEIU’s Justice for Janitors campaigns going back to the late 1980s. Former KRC Research Director Howard Wial wrote a brilliant article about this back in 1993. Howard, another colleague, and I wrote a shorter version of the same pitch in the house organ of the Democratic Leadership Council (The New Democrat) in 1998. These ideas also overlap those in Dishing It Out, a history of waitress unions published by Dorothy Sue Cobble in 1991, in part because Cobble recognized the relevance of these unions to the contemporary low-wage service sector.

The same basic union model works in any service industry sector that cannot relocate because it has to be near customers – in other words, for virtually all the nation’s low-wage jobs. This includes workers in hotels, supermarkets, hardware stores, and other parts of retail; in non-fast-food restaurants; in child care, long-term care, and health care as a whole – doctors and some nurses are well paid, but too often workers on the lower end of the pay scale do not get middle-class wages even though their compensation is a small fraction of health-care costs. The generic formula: $15 per hour starting wage, decent benefits, and, if some businesses and policymakers are smart about it, more investment in training and the creation of career ladders.

This is what the middle class looks like.

If we can cross the Rubicon to this type of institutional solution and lock in $15 per hour in just one or two places, it will take off. We’ll have a mass variation on the old line from When Harry Met Sally – “I’ll have what she’s having.” Except, in this case, it will be, “I’ll have that kind of unionism New York, or Chicago, or St. Louis fast food workers are having.” This take-off would be analogous to when the United Auto Workers broke the code to establish a union at GM after the Flint sit-down strike, which paved the way for unionism at Chrysler, Ford, GE, Westinghouse, and in the steel industry. It paved the way for industry-wide wages and benefits through mass manufacturing. And the American middle class was born with employers paying, who knows, maybe twice what they paid before the upsurge.

So, with respect, I disagree with labor historian Nelson Lichtenstein who says in The New York Times that these protests won’t lead to unionization.

Of course, to paraphrase an old joke about economists and recessions (“I’ve predicted seven of the last three recessions”), I’ve predicted three of the last zero “New Deals for a New Economy.”

Still, I stand by my conviction. This IS what the middle class looks like. And it’s just right there, waiting to be born.

Pennsylvania’s Unremarkable Private-Sector Job Performance

By Stephen Herzenberg, Third and State

Philadelphia Daily News Columnist John Baer is right to suggest that Governor Corbett’s jobs performance since January 2011 is less than “remarkable.”

Baer’s critique comes in response to the Governor’s first re-election campaign ad touting “a remarkable 116,000 new private-sector jobs” since he came into office in January 2011. Not so fast, Baer writes:

When one looks at net jobs here since January 2011, the picture is less than “remarkable.” The current net jobs gain is not 116,000. It’s 75,100.  Among the 10 largest states, of which we’re sixth, we gained the fewest jobs. … data on the four states with less population (Ohio, Georgia, Michigan and North Carolina) show each gained double the number of jobs we did, or more.

Governor Corbett gets to 116,000 by limiting his count to private-sector jobs only, not the tens of thousands of teachers, police officers and other public servants who lost their jobs following years of state and local budget cuts.

Even if you restrict your analysis to the private sector, Pennsylvania’s private-sector job growth has almost stalled since about a year into the Governor’s term. To see that, take a look at the chart below.

The chart shows cumulative private-sector job growth in Pennsylvania since January 2011, the month Baer uses as his point of reference. We rely on data from a survey of employers by the Bureau of Labor Statistics known as the “establishment” survey. There is another employment survey of households done monthly by the U.S. Census Bureau, and over short periods of time, the two can differ – but as Mark Price has explained, both surveys typically tell the same story about the health of the labor market over the long haul.

Looking at data from the establishment survey, Pennsylvania’s private-sector job growth was relatively robust in 2011, yielding a total of 100,000 net new private jobs by March 2012. In the 14 months since then, however, the state has seen private jobs growth of less than 5,000; private job growth is less than 20,000 even if you use a three-month moving average for the same period.

Another way to gauge how “unremarkable” the state’s private job performance has been is to compare it to the national level. We do this by first computing percent job growth for the U.S. since January 2011 and then computing what private job growth in Pennsylvania would have been if the state’s percent job growth had kept pace with the national average. The gap between what Pennsylvania’s job growth would have been if it matched the national rate and actual Pennsylvania job growth is labeled “Pennsylvania’s growing private job gap” in the next chart.

What explains Pennsylvania’s private-sector job growth trends since early 2011 relative to the nation?

One hypothesis for Pennsylvania’s strong showing in 2011 is that the robust job growth that year partly reflected the policies of outgoing Governor Ed Rendell. A related hypothesis is that the policies of Governor Corbett, most prominently the impact of budget cuts and public-sector layoffs, took a year or so to have an impact on the private-sector economy.

Yet another factor could be the natural gas industry. Although the impact of drilling on Pennsylvania jobs has been exaggerated, it did have some impact. Since 2011, however, drilling and natural gas employment have ebbed. The flat-lining of private-sector job growth in Pennsylvania since the first quarter of 2012 makes abundantly clear that the natural gas industry alone never amounted to an adequate jobs strategy for the state.

A final factor is slow population growth in Pennsylvania. From April 1, 2010 to July 1, 2011, population growth in Pennsylvania was 0.5% compared to 1.7% nationally. When the economy is at full employment, the growth of the working-age population has more impact than any other factor on job growth – as a result, job growth in states with slowly-growing populations should not be expected to keep pace with that of the nation. However, when unemployment rates are well above full employment, as at present, then state job growth rates are more likely to cluster close to the national average and less likely to be impacted primarily by relative rates of long-term population growth.

ALEC Policies Sell ‘Snake Oil to the States’

By Sharon Ward, Third and States

Three national organizations offered a scathing criticism of policies endorsed by the American Legislative Exchange Council, or ALEC, in a conference call with reporters last week. Their findings strike a stake in the heart of ALEC claims that its view of the world – lower taxes, fewer workplace protections, and diminished public investments – is good for the public. 

Pennsylvania state lawmakers who look to ALEC for guidance on economic policy should stand up and take notice. 

Iowa Policy Project research director Peter Fisher discussed a recent report he co-authored with researchers from Good Jobs First, concluding that the tax, budget, and economic prescriptions put forth by ALEC simply don’t work.

Selling Snake Oil to the States took a look at ALEC’s annual Rich States, Poor States report, which ranks states based on their “economic outlooks” as defined by ALEC. The factors should come as no surprise: states with low taxes and right-to-work laws rank high by ALEC; those with progressive taxes, corporate income taxes, and worker protections rank far behind.

Fisher compared the ALEC rankings with actual state performance on real economic indicators over a four-year period. Do ALEC’s policy prescriptions improve state economies? The answer is no.

Between 2007 and 2011, researchers found no relationship between a high ALEC ranking and employment. They did find a correlation on personal incomes and poverty rates among states ranked high by ALEC, but it was a negative one – the better a state fared on the ALEC scale, the worse it did in real life. As Fisher said during the conference call:

It should be hardly surprising that policies to keep wages low have the effect of lowering the state’s income. … The ALEC policy prescriptions for states will not lead to growth and prosperity but to further inequality and lower incomes.

The Center on Budget and Policy Priorities examined sweeping tax and budget policies that ALEC is currently lobbying for in the states. The policies largely encompass deep tax cuts for wealthy individuals, investors, and corporations that will leave middle- and lower-income families paying more.

Both reports note that the ALEC agenda promotes low wage growth for families, fewer workplace protections, and strategies to starve public investments in education, health care, and other priorities – all of which reputable economists agree are critical to job creation and economic growth.

It is an article of faith among Pennsylvania lawmakers that ALEC policies are good for the economy. These reports provide clear and convincing evidence to the contrary: the arguments that the ALEC agenda are good for real people are nothing but snake oil. The policies are good for the businesses that pour millions into ALEC to promote this agenda. 

Governor Tom Corbett has hidden large expensive new tax cuts to profitable corporations in his budget proposal released this month. This and other ALEC agenda items won’t create jobs, but they will lead to greater inequality, slower income growth, and continued starvation of our public schools, transit systems, and other priorities.

Pennsylvania Private Job Performance Through the Looking Glass

By Stephen Herzenberg, Third and State

In the 1890s, scientist George Stratton reported that, after four days of wearing a lens that inverted his vision, his brain reprocessed what he saw and flipped everything back up the right way.

John Micek’s Friday article brought this experiment to mind.  Micek quotes Pennsylvania House Speaker Sam Smith summing up the accomplishments of the House of Representatives in the 2011-12 legislative session: “We … focused on the economy and private-sector job creation.” Majority Leader Mike Turzai echoed Smith saying: “We kept our commitments on fiscal responsibility and private-sector job-creation.”

Let’s take a look at some actual job numbers.

Between January 2011 (the start of the current legislative session) and September 2012 (the latest data available), the number of private-sector jobs in Pennsylvania grew by 87,000, an increase of 1.8%. In this period, Pennsylvania ranked 31st out of the 50 states for private job growth by percentage. National private-sector job growth equaled 3%.

If you look at the last 12 months, from September 2011 to September 2012, Pennsylvania’s private-sector job ranking falls to 35th, with the state’s private-sector job growth equal to about half the national rate.

Now, compare that to job growth between January 2010 and January 2011, when the commonwealth ranked 12th among the 50 states with job growth of 1.8% (compared to the national rate of 1.3%).

As our summer policy brief explained, part of what is dragging down private job growth in Pennsylvania are deep cuts to education and other services that led to the layoff of 20,000 teachers and thousands of other public-sector workers in 2011. As a result, private-sector job growth also is not keeping pace with more than three out of every five states.

I’d hate to see the numbers if the Legislature hadn’t kept its commitments on private-sector job growth.

‘How ’bout No, You Crazy Dutch….’

By Mark Price, Third and State

The only proper villain we could find from the Netherlands

On Monday night, the Lower Allen Township commissioners in Cumberland County considered a proposal from Ahold USA, the corporate parent of Giant Food Stores, for a $400,000 property tax abatement on a meat repackaging plant on which the company has already broken ground. (Ahold USA is itself the subsidiary of the Netherlands-based Ahold.)

The company has neglected a basic principle of the economic development game through which companies extract subsidies and tax breaks from states and localities where they were going to build anyway: until you have the subsidy in hand, don't give away that it will not impact your location decision.

But since the company made this error, the title of this blog post, taken from the Austin Powers movie Goldmember, should suffice for the township's answer. (It is pure coincidence that Goldmember, a Dutchman pictured to the right, has a gold G on his velvet sweatsuit.)

Here are two stories on this issue.

The Lower Allen commissioners should continue to say no to Ahold's request because it is a simple giveaway that diverts needed tax revenue from the township. It would be that much costlier if the West Shore School District (which has absorbed $2.2 million in state budget cuts since 2010-11) and Cumberland County (where property taxes for most homeowners and businesses may rise by 22% next year) follow suit.

The repackaging plant will consolidate meat cutting operations for Ahold USA's stores in the mid-Atlantic region. Customers will no longer get their meat freshly cut in the store, instead, the meat cutting and packaging function is being moved to a central location with easy access to the interstate. Some meat cutters will lose their jobs in the process, while others might be offered jobs at the new facility, at a lower wage.

For its $400,000, Lower Allen Township is being promised between 450 and 800 jobs; there is no word on how many jobs will be lost at Giant Food Stores in the region or at the company's Maryland division.   

Normally, a corporate giant like Ahold will approach government officials to inform them they are on the short list for a new facility being planned. Just look at how the Shell Corporation enticed incentive offers from Ohio and West Virginia before securing the mother lode of all incentives from Pennsylvania (a $1.67 billion, 25-year tax break).

Unfortunately for Ahold USA, the company has already broken ground on the meat repackaging plant. So the township commissioners made the right move by putting the request on hold. Why divert scarce tax dollars to a profitable corporation to do something they are already doing anyway?

While they make good beer in the Netherlands, Ahold corporate honchos could learn a thing or two about economic development blackmail from Dick Yuengling Jr., the owner and president of D.G. Yuengling & Son’s.

Although the company recently expanded distribution in Ohio, making Western Pennsylvania an economically attractive location to expand production, the brewing scion doubts he would build a new brewery in Pennsylvania. Yuengling wasn't specific about what he means by business climate, but it is pretty clear from a Patriot-News interview that he doesn't think Pennsylvania as a rule offers enough taxpayer cash to corporations. (Although, Yuengling says his decision of where to build will not be based on the incentives offered.)

The decision comes down to taxes, incentives and the state’s business climate, Yuengling said. 

In the interview, Yuengling hinted that there are far more business-friendly states. And while he didn’t directly criticize any Pennsylvania administration, past or present, he said he can never be certain which way the state is leaning in terms of its tax and business policies. 

By contrast, he said enticing incentives offered by other states might be too good to pass up. However, he declined to cite any states he might be considering for the brewery… 

“We don’t necessarily base business decisions on incentives like that. But if they are going to give them to somebody, we would stand there and take them.” 

Fact Checking the Corbett Jobs Record…and Some Unsolicited Advice

By Stephen Herzenberg, Third and State

The Corbett administration has a new summary of Pennsylvania’s recent job performance. Today’s news that Pennsylvania’s unemployment rate is as high as the national unemployment rate underscores, however, that the state’s recent jobs record is not  good. Let’s take a closer look.

PA vs. U.S.: The Corbett jobs summary notes that Pennsylvania’s unemployment rate is below the national rate – and it was when the summary was first released. This was not a new trend: the Pennsylvania rate was a point or a point-and-a-half below the national rate for most of the four years before Governor Corbett took office. A year ago, the gap between the Pennsylvania and U.S. unemployment rate was still statistically significant. (See Table A.) But the gap between the two rates – the “Pennsylvania advantage” – has been shrinking steadily since 2010 until the Pennsylvania rate finally climbed to the U.S. level in August 2012, both equaling 8.1%.

Private-sector Job Growth: While the administration touts private-sector job growth in 2011, the numbers reflect a national trend, rather than a unique Pennsylvania story. 

The U.S. economy has had 30 consecutive months of private-sector job growth. In fact, Pennsylvania’s rank for the percent growth in private-sector job growth has fallen from 8th in 2010 to 36th in the 12 months ending in July 2012. One of the reasons that Pennsylvania’s private-sector job-growth ranking is down is the deeper cuts in public employment in Pennsylvania compared to other states. Deep cuts to Pennsylvania public schools and colleges led to a loss of 14,000 education jobs alone in 2011.

These layoffs impact the classroom and Main Street too. Unemployed teachers, like unemployed factory workers, don’t have money to spend, which affects the broader economy. 

Manufacturing Job Growth: Manufacturing jobs growth improved in 2011, but again reflects national trends. In fact, Pennsylvania’s manufacturing job growth since early 2010 is slightly below half the national increase. (See The State of Working Pennsylvania 2012.) 

New Hires in Marcellus Shale: Not this one again. The administration is touting natural gas industry growth by citing the number of new hires. As we’ve explained repeatedly, new hires are not new jobs (most new hires replace people who quit or are fired). In fact, the number of new hires is basically a meaningless number. Statewide there were 580,400 new hires during the 2nd quarter in Pennsylvania, while total non-farm employment rose between the 1st and 2nd quarter by less than 300 jobs. In other words, the only reason to cite new hires is to make the job gain seem substantially larger than it really is. 

The gas industry has led to some job growth in Pennsylvania, just not on the scale claimed by the industry. Between the 4th quarter of 2008 and the 4th quarter of 2011, employment in the core Marcellus Shale industries grew by 18,000. That gain was largely wiped out by the loss of 14,000 education jobs in just one year. Even using the most generous estimates, employment in the Marcellus Shale in direct and ancillary industries in the 4th quarter of 2011 (as published by the Pennsylvania Department of Labor and industry) was 238,400 – about 4.2% of total state employment.

Here’s the unsolicited advice: Twenty months into Governor Corbett’s first term, there is still time for the Governor to pursue policies that will improve Pennsylvania’s job performance. There are multiple options that have strong bipartisan and business support. For example, investing in transportation infrastructure as recommended by the Governor’s own transportation commission. 

In manufacturing and workforce development, the administration is also saying some of the right things. But talk is cheap: we need actual investment in skills and innovation if our job performance is going to improve relative to other states and the nation.