September 17, 2014
As originally published in the New Hampshire Union Leader
The biggest problem with the anemic job growth New Hampshire has been saddled with for the last decade is not the lack of jobs but the forlorn hope of policymakers that there is one silver bullet that will fix everything.
It used to be true (and is no longer) that New Hampshire grew faster than most states when the economy was strong and came back from recessions before other states and more aggressively than other states. The explosive growth of jobs in the 1970s, the 1980s, and at least to some extent the 1990s was something we took for granted and defined what we perceived as the dynamic economic character of the state.
In the 1980s, New Hampshire’s economy went through an explosive boom cycle. At our job creation peak there were more jobs than available workers – we were the North Dakota of our time. For example, from 1983 to 1989 the number of jobs in New Hampshire increased by 28% in just six years.
That kind of an explosive jobs boom will create opportunities for entry level workers, improve the chances for good workers to move to better jobs faster and more regularly, and makes for a generally comfortable society.
Even booms didn’t make us immune from recessions and we went through a slow time. Our growth in the 1990s after the early decade recessions was 14% over six years – about half of the boom 1980s but still quite strong.
The policy challenge of recent times has been that even that more mature growth has not returned. We had the same number of jobs at the end of 2013 as we had eight years earlier despite a growing population. Two recessions over the last fifteen years have hurt but we no longer experience strong growth coming out of the recession. No one writes anymore that “New Hampshire led New England out of the recession.”
That frightening job situation leads policymakers to routinely ask “what’s the one thing you would do, the one change you would make, to promote job growth?” The right answer is to tell them it’s the wrong question. The one thing I would do is to try and convince lawmakers that there isn’t one thing.
Anyone who says cut this tax, pave this road, fund this program and all will be well is naïve. New Hampshire has become less and less competitive but not by making one big change that can be reversed. Nor do businesses locate on the basis of one factor alone. A business looking to compete with other businesses looks at dozens of factors and their cumulative fiscal and psychological effect. Our state government needs to be the same.
It is true without question that business taxes have gotten to a troublesome place. The Tax Foundation finds New Hampshire among the worst states in the country in the business tax component of their competitiveness index. That means that businesses making tax burden a significant consideration will frown on us. The bad news is that economic development professionals will almost uniformly tell you that the first question any potential business they are recruiting asks is about taxes.
But it isn’t just business taxes. Our unemployment taxes are quite high. The workers compensation rates that businesses are required to pay are among the highest in the country here. The cumulative effect of seeing each of those things on a spreadsheet is that New Hampshire begins to lose a bit of the “low-tax New Hampshire” reputation that defined our brand in the 1980s and 1990s. The psychological effect of that reputation goes well beyond the totals and averages of any particular spreadsheet.
But any business will tell you that there are other factors like the cost of doing business. New Hampshire ranks 49th in the cost of health insurance. Only Massachusetts is higher. Family coverage here is about 20% higher than in average states – states we compete with for jobs.
More troublesome are our electric rates. A lot of the high tech and manufacturing jobs we want to attract use a lot of electricity. It’s not clear why any concern which uses a lot of electricity would even consider New Hampshire. Our rates for industrial users are more than double what the 10 or 15 most competitive states charge and higher than all but a handful of neighbors.
No one thing will change our competitiveness nor are the handful of things I’ve mentioned the only ones that matter. But if we want jobs for our kids we need to pay attention to many details or just tell them to move to Texas.