Menu Bar

Home           Calendar           Topics          Just Charlestown          About Us

Saturday, January 25, 2014

RI Economy: "Moving the needle" or riding it?

A bit more on Rhode Island’s ostriches

In my last post, I suggested that instead of dealing with actual problems, Rhode Island “leadership” prefers to either focus on distractions or bury their heads in the sand. One of the examples of issues I used was the long-term unemployment rate; which is usually defined as being out of work six-months or more. WPRI’s Ted Nesi yesterday pointed out the chart below, released by the U.S. Senate’s Joint Economic Committee (JEC) Democratic staff in support of Senate Dems’ push to extend unemployment insurance:

Long-term unemployment by state

As Nesi points out, RI proportionally has more long-term unemployed than any other state. If you drill down into the JEC Democratic staff’s numbers, what they show is that of our 9% unemployment rate (which is called the “U-3 unemployment rate” – that’ll be important later), 44% of those workers are long-term unemployed.

Why is that a problem? Well, there’s pretty clear evidence that employers don’t like to hire the long-term unemployed; at least according to a Boston Fed study released in October 2012. Not even a “can’t get an interview” situation, it’s a “won’t look at the application” situation. 

Unlike previous recessions, where when job vacancies rose both short-term and long-term unemployment fell the Great Recession has been different. An increase in job vacancies isn’t causing a decrease in long-term unemployment. So even when employers have openings, they aren’t filling them, despite the existence of candidates who are currently long-term unemployed.

Now, this might be the point where people start saying “well, there’s a skills gap, and we need more workforce development.” But March 2013 research from the University of Wisconsin Milwaukee demonstrates that, consistent with 40 years of jobs and training research, “workforce development” has little to no impact on workers and the “skills gap” is a mythological creature on par with Pegasus and the Questing Beast. The study quotes Anthony Carnevale of Georgetown University Center on Education and Workforce Development:

Training doesn’t create jobs. Jobs create training. And people get that backwards all the time. In the real world, down at the ground level, if there’s no demand for magic, there’s no demand for magicians.

As Matthew O’Brien of The Atlantic points out in the article linked above, the discrimination against the long-term unemployed is a vicious cycle which has the ability to permanently impoverish the country. Eventually, those 4.1% are going to burn their way through every family member, friend, and place of goodwill available. And they’ll end up homeless. 

Combine that with the structural deficit in the state budget, a likely loss in revenue from gambling once Massachusetts casinos start up, and a likely future economic crash due to failure on the part of the national government to reform our economy to prevent the abuses that caused the Great Recession… well, that means we’ll have a state even less capable of dealing with the crisis at hand.

Before I move on to our state’s “response” to this slow-motion crisis, I want to make a final point about the unemployment rate. If we really want to imagine what a healthy RI economy looks like, we have to look past the U-3 or “official” unemployment rate. 

According to the Bureau of Labor Statistics, Rhode Island’s U-6 unemployment rate for Q4 2012 through Q3 2013, which includes the total unemployed plus marginally attached worker (people who have given up looking for work in the past four weeks) plus people employed part time for economic reasons Rhode Island has a 15.8% unemployment/underemployment rate. While this means we are no longer the worst in the nation (5 states are equal to or above ours), it’s nowhere near the 8.3% we had just before the Great Recession hit.

So given that this is perhaps the greatest threat to our state’s economic well-being, what was the major economic package to come out of General Assembly and be signed by Governor Chafee? 

Moving the Needle” which states the problem it intends to address in its first sentence: “In its annual ‘Top States for Business’ rankings, published on July 10, 2012, CNBC ranked Rhode Island 50th of 50 states on how appealing the state is to start or grow a business.”

Distractions. State leadership is more concerned with the subjective rankings given to it by a television station (which has as part of its goal, to entertain and make a profit) than the reality in front of it. That’s the reality where 4.1% of our labor force has been searching for work for six months or more. Where 9% of it is unemployed. Where 15.8% is either looking for work, discouraged or gave up looking for work, or taking a part time job until economic conditions improve. Let’s jump back to that Prof. Carnevale quote: “if there’s no demand for magic, there’s no demand for magicians.

That’s the problem in a nutshell. There is a demand problem in the state. If you’re unemployed or on a really tight budget, you can’t buy what business is selling. So it doesn’t matter too much what businesses Rhode Island can’t attract, because even if it can attract them (“competitiveness” between states is usually nothing more generous cash giveaways), there’s a weak customer base that can’t support them. Moving the Needle is just about getting us more magicians… or illusionists, I think is the synonym.

It’s that mindset that produced 38 Studios, a pie-in-the-sky dream of beaucoup bucks while kick-starting a tech industrial boom and hiring a bunch of Rhode Islanders. It’s utterly backwards. We need a Rhode Islanders First jobs program, that puts our actually existing (and struggling) citizens ahead of all the fantasies of start-ups and imaginary migrating businesses. 

We know we can’t rely on the federal government to provide one, so we’ll have to do this ourselves. If that’s a Rhode Island-style WPA/CCC type effort, so be it. If it means we pay people to fix our infrastructure, assist our nonprofits and even work in support of our businesses, that’s fine with me.

You can say that’s government picking winners and losers. I will too. I say it’s definitely government picking a winner. Rhode Island.

Samuel G. Howard - A native-born Rhode Islander, educated in Providence Public Schools, went to college in North Carolina and a political junkie and pessimistic optimist.