And the first, unfortunately, will be the last
Delaware, like all states, loves to trumpet good news about its economy.
Perhaps that’s why a story in last week’s Economist magazine was met with silence.
The headline doesn’t mince words: “First State comes last.” Neither does the subhead: “Living standards drop in America’s business capital.”
Wage growth in the U.S., the article says, has been “measly” for years. But one state does particularly badly: Delaware.
That’s right. Delaware ranks 50th out of 50 states in wage growth. Amazingly, it gets worse.
“From 2009 to 2014,” the article says, “it was the only state where in which hourly and weekly earnings dropped in cash terms.”
The only state where wages dropped. That’s not a good thing.
In the article, John Stapleford of the Caesar Rodney Institute, described as a libertarian, points to the state’s lack of a “right-to-work” law as part of the problem. That makes Delaware “an unattractive place to locate a factory.”
Politicians like to promote “right-to-work” laws the way they promote charter schools: They’re a convenient “magic bullet” approach to solving intractable problems.
Do “right-to-work” laws work? Hard to say. There are so many factors. I’ll just mention one state. In recent years, North Dakota , a“right-to-work” state, has enjoyed spectacular employment growth.
But is that because of the law or the oil fracking boom? And if the oil bust continues, will the state start shedding jobs? A recent Forbes magazine article put oil industry-wide layoffs at “75,000 and counting.” One industry professional on CNN.com predicted 20,000 layoffs in North Dakota by June.
I doubt companies attracted by the state’s “right-to-work” law will be able to make up the slack.
Also, while manufacturing jobs tend to pay more, it’s a tough sell to suggest that “right-to-work” laws are going to increase wages. A December 2014 Wall Street Journal article noted the difficulty of figuring out the cause-and-effect relationship.
It said “right-to-work” states tend to have stronger job growth but lower wages.
Here’s another - and likely far larger – factor facing Delaware as it seeks large, well-paying employers: the nation-wide bidding war to lure companies to set up shop.
Business leaders talk a good game about getting government out of the way, but not when they’re looking for a handout.
A story in Sunday’s Washington Post told how far Nevada was willing to go to seal the deal for a new Tesla auto manufacturing plant: $1.2 billion in “incentives,” provided by taxpayers. Yes, that’s billion with a “B.”
With 6,500 promised jobs, according to the Post, that amounts to a truly staggering $190,000 per position.
I couldn’t help wondering: What if Nevada were to provide $190,000 in “incentives” for 6,500 people who wanted to start their own small business? How might that work out?
Nah, that would be government interference in the economy.
In Delaware, lawmakers complained – and understandably so – about all the money lost trying to land Fisker Automotive. The amount of those incentives: $20 million, the kind of change Nevada can apparently find in its seat cushions.
We’re a minnow swimming with sharks. Delawareans can wail, but that’s the way the game is played. America’s business titans demand huge welfare checks – I mean, incentives – before opening a plant.
(And wouldn’t the Delaware Wailers be a good name for a rock band? It rolls off the tongue better than the Delaware Destroyers.)
Which brings me, in an admittedly roundabout way, to the recent Republican proposal to cut the state budget across the board by 5 percent.
This, Republican state senators said in a letter to Gov. Markell, would free up $195 million that could be used for fixing roads, giving state employees a raise and setting aside a reserve contingency fund.
Brilliant!
All you have to do is cut spending 5 percent across the board and then we’ll be able to do all these wonderful things.
What will be cut? The senators don’t say. Apparently, that’s not their job.
Please. Let’s be serious. This proposal smacks of “let’s have our cake and eat it too.” The senators ignore the pain of the cuts, but boast of the benefits, including “thousands of construction jobs.”
If something sounds too good to be true, it usually is.
One local Republican senator, Sen. Ernie Lopez of Lewes, has made a career as a government employee, working with the University of Delaware. So has a local representative, Rep. Steve Smyk of Milton, a retired state trooper. (As a representative, Smyk didn’t sign the letter, which came from Republican senators, but he certainly would be knowledgeable.) They now have the added experience of working with the General Assembly.
If they don’t know where the fat is in government spending, who does?
(This column will continue next week.)
