Tag Archives: economic development

A Lesson On Know-Nothingness

Paul Krugman recently delivered a lesson on “Know Nothingness”--both as historical reference and descriptive term:

If you’re a student of history, you might be comparing that person to a member of the Know Nothing party of the 1850s, a bigoted, xenophobic, anti-immigrant group that at its peak included more than a hundred members of Congress and eight governors. More likely, however, you’re suggesting that said person is willfully ignorant, someone who rejects facts that might conflict with his or her prejudices.

The sad thing is that America is currently ruled by people who fit both definitions.

The parallels between anti-immigrant hysteria in the mid-19th century and today are too obvious to require enumeration. Krugman does, however, enumerate several, pointing out that the countries considered “shitholes” in the 19th Century –especially Germany and Ireland–differ from those in Trump’s dark-skinned category today.

It isn’t just bigotry, of course. It’s profound ignorance.

But today’s Republicans — for this isn’t just about Donald Trump, it’s about a whole party — aren’t just Know-Nothings, they’re also know-nothings. The range of issues on which conservatives insist that the facts have a well-known liberal bias just keeps widening.

One result of this embrace of ignorance is a remarkable estrangement between modern conservatives and highly educated Americans, especially but not only college faculty. The right insists that the scarcity of self-identified conservatives in the academy is evidence of discrimination against their views, of political correctness run wild.

Those of us who work in the academy know firsthand that this accusation of discrimination is utter bullshit.

Case in point: my office in the School of Public and Environmental Affairs is on the same floor as that of professors in the Kelley School of Business. When I first joined the faculty, twenty years ago, a majority of those professors self-identified as fiscally-conservative Republicans. They continue to be conservative, but very few of them are still Republicans. When the party rejected science, evidence and scholarly research, they left.  As Krugman says of the science professorate, “When the more or less official position of your party is that climate change is a hoax and evolution never happened, you won’t get much support from people who take evidence seriously.”

But conservatives don’t see the rejection of their orthodoxies by people who know what they’re talking about as a sign that they might need to rethink. Instead, they’ve soured on scholarship and education in general. Remarkably, a clear majority of Republicans now say that colleges and universities have a negative effect on America.

Krugman then points to research showing the growing importance of “clusters of highly skilled workers” who create what he calls “virtuous circles of growth and innovation.” Those clusters disproportionately emerge around universities.  In 2016, voters largely divided along educational lines, with the better-educated, rising regions carried by Hillary Clinton, and more rural, under-educated and less skilled regions going for Trump.

The anti-education, anti-evidence, anti-science voters who remain in the GOP are also disproportionately likely to express tribal, White Christian beliefs: creationism, rather than evolution, America as (their version of) a Christian Nation.

Newsweek recently reported

Evangelical Christians overwhelmingly support President Donald Trump because they believe he’ll cause the world to end.

Many have questioned why devout evangelicals support Trump, a man who has bragged about sexual assault, lies perpetually and once admitted he never asks God for forgiveness. Trump’s lack of knowledge of the Bible is also well-known.

Nevertheless, many evangelical Christians believe that Trump was chosen by God to usher in a new era, a part of history called the “end times”….  the time when Jesus returns to Earth and judges all people.

Are people who hold these beliefs representative of Christianity? No. Are they rare on most university faculties ? Yes, and for obvious reasons.

When knowledge and expertise are devalued, when empirical evidence is scorned, when the weighty and complex search for meaning that characterizes serious religiosity is replaced with superstition, rejection of reason and fear of the Other, the know-nothings have won.

 

Economic Development Develops

Every so often, we need to take our eyes off the clown show in Washington, D.C., and consider what’s happening elsewhere. For example, the much-hyped competition for Amazon’s second headquarters.

I hate to be Debby Downer, but that competition is an excellent example of what’s wrong with current approaches to economic development. Economic development offices around the country participate in what is nationally a zero-sum game–attracting businesses from one locality to another, and spending lavishly to do so. (According to several sources, states and counties have awarded over $1.3 billion in incentives just to attract Amazon’s fulfillment centers.)

As a Brookings Institute report recently noted, this approach to job creation is problematic.

The most obvious is that in each of these cases, Amazon was going to come with or without incentives. It is a core tenet of Amazon’s strategy to be able to rapidly deliver products directly to people’s homes, increasingly with same day service, so they must have a major presence in every large region. Seemingly every metro area we’ve worked in over the past several years has highlighted the attraction of an Amazon facility as a major local economic development success story. (A quick web search confirmed the presence or recent announcement of one or more major Amazon fulfillment centers in or near each of the 40 largest US metro regions.) In these cases, state incentives make no sense. And county incentives are used only to influence selection of the actual site within a region, thus pitting local jurisdictions against each other to claim a political win, with no actual competitive benefit to the regional economy….

Another issue is spatial mismatch. In our work across the country, many employers such as Amazon express frustration in not being able to find enough workers—while at the same time, workers complain of not having access to good jobs. This problem is predictable. While traditional retail jobs are spread throughout metro areas to be near customers (and by default, the workforce), warehouse and logistics operations (such as Amazon’s) consolidate employees under one roof on the periphery of the metro…. The Amazon jobs that replaced these are less accessible to many of the lower-skilled employees that are best suited to fill them because workers do not live nearby. Lack of access to transit, zoning decisions that limit nearby affordable housing, and childcare responsibilities severely limit the number of workers in a given region for which this type of job commute makes sense.

The Amazon Headquarters frenzy highlights what economic development has become; a system that revolves around government giveaways to corporations.

There’s a better way. And the Indianapolis Chamber of Commerce has recently partnered with Brookings to research that better way, culminating in a report titled “Rebuilding the Dream: Inclusive Growth in the Indianapolis Region.” It begins with a recognition that the economy is “misaligned between employer needs and workforce capability, and riddled with barriers to upward mobility,” and it urges policymakers to focus on removing those barriers and creating the conditions for inclusive and sustainable growth.

Rather than a competition to bring new employers to the region, the report advocates an emphasis on expanding companies that are already here, especially but not exclusively in so-called “advanced” industries (tech, very broadly defined). If those companies are to grow, however, they need access to a workforce capable of doing the jobs they are creating. The report enumerates the multiple barriers those potential employees face, and recommends a comprehensive and strategic approach to their removal: improved transportation, childcare,  health care innovations, language and training opportunities, etc.

This makes so much sense.

Rather than prospecting for companies willing to relocate and then bribing them with our tax dollars, the Chamber wants us to spend those dollars on measures that will reduce the mismatch between employer needs and the ability of unemployed or underemployed residents to meet those needs.

This is an investment that would pay real–rather than PR– dividends. Policymakers should endorse it.

Playing The Economic Development Lottery

Amazon’s recent announcement that it would be “accepting proposals” for a secondary headquarters has set off a predictable–and unfortunate– competition by cities all over the country.

“Pick me! Pick me!” Even Indianapolis and Fishers have teamed up for the hunt.

The Brookings Institution gets the dynamics right.

In the world of state and local economic development, Amazon is a whale. The possibility of 50,000 highly-paid jobs for professionals at a new $5 billion development is too tempting to pass up for any metro area with even the slimmest hope of courting one of the largest and most profitable companies in the world. Amazon’s unsubtle hint that tax incentives will play a big role in its decision helps ensure it will receive one of the biggest packages in history. Already, cities and states have rushed to announce their hope to entice Amazon with their distinct value proposition, and—in all likelihood—breathtaking handouts.

This begs important questions about the wisdom of state and local economic development strategies and their ability to remain focused on addressing the real challenges American communities face today.

Amazon’s shameless invitation to see who will offer the biggest bribe does indeed raise “important questions” about standard economic development practices–practices which assume a zero-sum competition to entice employers to relocate to the redevelopment officer’s city or state.

That competition is expensive for bidders, most of whom have no real prospect of securing the prize, and even more expensive for taxpayers of the eventual winner. As the Brookings article points out, Amazon undoubtedly narrowed its choices to two or three locations before it ever  announced its search for a headquarters site.

Amazon’s faux competition will lure one otherwise enviable place into handing over a huge amount of its taxpayers’ money to a fabulously wealthy corporation for something that place could have gotten for free.

As anyone who has ever been involved in one of these efforts can attest, cities will waste significant staff time calculating and crafting proposals, time and effort that could have gone into solving other problems.

It is past time to revisit economic development policies that center on these expensive efforts to lure employer A from location B to location C. Instead, we need to take a hard look at the strengths and weaknesses of our local economy, and determine what measures would help us grow the employers who are already here.

What are the jobs that are open? Why aren’t they being filled? Are there “skill gaps” keeping jobless Hoosiers from filling them? If so, what can we do to provide unemployed workers with the necessary skills? Is the problem transportation–the inability of workers to get to the places they are needed? Can we improve public transportation to solve that problem?

In other words, what are the unmet needs of Hoosier employers and workers, and how can we meet those needs?

Political figures love to cut ribbons and announce that manufacturer A or retailer B is moving to town and hiring X number of employees. Those announcements rarely include enumerations of the costly enticements (bribes) that accompanied the decision to locate here: tax abatements, infrastructure improvements, training grants and the like.

Efforts to grow the industries and other enterprises that are already here would not only be more cost-effective, they would also be fairer. These are employers who are already part of our community, after all–already paying taxes, already hiring local residents. They may not be as glamorous as Amazon, but in the real-world scheme of things, they’re much more important.

Amazon may be a whale, but we don’t have to emulate Ahab.

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…

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.”

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