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Recent Updates:
A new independent analysis of Delaware’s permitting process finds that other states in the region, including Maryland and Pennsylvania, are able to achieve substantially faster permit approvals for businesses wishing to locate or expand in the state. As a result, Delaware is missing significant economic development opportunities in the competition for jobs, talent and investment.
The analysis, conducted by professional services firm KPMG, concludes that Delaware has an opportunity to be more competitive if its permitting processes were strengthened through streamlined communication between state agencies, greater transparency and cost predictability, and a fast-track approval program for high-priority projects, among other recommendations.
[See KPMS's report below.]
The analysis was commissioned by the Ready In 6 Coalition, comprised of Delaware Business Roundtable, Delaware State Chamber, Kent Economic Partnership, Greater Kent Committee, Sussex County Economic Development Action Team, ACEC Delaware, the Committee of 100, the Central Delaware Chamber, the New Castle County Chamber, Delaware Contractors Association, the Delaware Chapter of Associated Builders and Contractors, and the Home Builders Association of Delaware.
The analysis finds, “With significant competition between states for jobs, talent and investment, an efficient permit process is critical to demonstrate a favorable business climate and provide a predictable outcome for businesses seeking to locate or expand in Delaware. Because prospective businesses target locations which can achieve permitting in as few as six months, those states with longer permit timeframes experience reduced interest and missed economic development opportunities.”
Delaware’s permitting process can stretch up to 24 months, placing the state at a distinct economic development disadvantage when it comes to attracting and growing businesses. “In the region, Delaware’s competitors, Maryland and Pennsylvania, are able to achieve substantially faster permit approvals. As a result, Delaware is missing significant economic development opportunities,” the analysis concludes.
The Roundtable and its partners have launched a “Ready in 6” initiative, designed to cut the permitting timeline from 24 months to six months to make Delaware more competitive with other states.
The report recommends state leaders improve in three key areas to streamline the permitting process in Delaware: Enhance communication, increase efficiency and reduce paperwork, and track and use data more effectively.
Click here to read the full analysis.
KPMG Analysis of DE Permit Competitiveness
KPMG Analysis of DE Permit Competitiveness
Prepared for Delaware Business Roundtable
Ready in 6 Coalition
Dec. 2019
https://www.dbrt.org/_files/ugd/5cde7e_eff6b929af5e4d6cacc77ddd7b7f040f.pdf
KPMG Analysis.cleaned (1).pdfProblem with the KPMG Report:
Problem with the KPMG Report:
https://www.dbrt.org/ready-in-6 has a link to the KPMG report that they refer to as 'independent analysis of Delaware’s permitting process'. See pg 2, pg 55 & 57 of KPMG report:
1.See KPMG's Disclaimer on page 2:
1.See KPMG's Disclaimer on page 2:
2.The Question Posed on page 55 is one-sided
2.The Question Posed on page 55 is one-sided
(See the clipping below.)
The Question that is Missing: What could be the cost of rushing for Any-Business-at-Any-Cost and the lack of transparency in the Permitting by Pre-approved Private Consultants? Would there be any cost of reversing the approval if a business turns out to be costing the State more funds, such as frequent inspections, clean up, or court proceedings?
3.Note what the report spelled out as not included - on page 57
3.Note what the report spelled out as not included - on page 57
(See the dashed box below.)
So, they did not include 'congestion, pollution, quality of life impacts'!
Issues of Relying on Methods and Conclusions of the KPMG Report:
Issues of Relying on Methods and Conclusions of the KPMG Report:
The Ready in 6 Coalition started with the intention to cook the fish only on one side. If one side is not cooked, it could cause irreversible and extremely costly damage.
They will do nothing to attract high-quality employers and by favoring rapid growth of low-quality employers and jobs that they are harming the ability to attract the type of employer that would transform Delaware to being a place where educated residents will stay as opposed to fleeing to pursue opportunities currently unavailable in Delaware.
Letter of Concern
Letter of Concern
We are writing to you to briefly express our concerns regarding the subject of legislative activity. Together, it appears on their face that the proposed legislative changes are intended to make it easier for developers to navigate certain existing requirements in some cases or to exempt certain projects entirely from certain State regulations. Why are these changes deemed necessary? In the case of HB 104, the official synopsis of the bill contains a finding of fact that the PLUS review has been an important and successful program. In the case of HB 101, there is no explanation provided why an expedited review process is necessary on a routine basis for entrance plans and stormwater and sediment management plans. As explained more fully below, we believe these proposed changes are short-sighted, may lead to adverse unintended consequences if adopted, and may ultimately make the State less attractive to businesses seeking to do business in Delaware if this is the or a basis for these legislative initiatives.
General Concerns:
If the basis for these legislative initiatives is to make Delaware more attractive for business, they are premature at best and will not likely produce the intended effect in and of themselves. While we may agree that government regulation should be periodically reviewed to determine whether it is on balance and in practice, beneficial or detrimental to its intended purpose, the proposed bills will undoubtedly have a negative impact on the affected programs without any significant benefit flowing to the State and local jurisdictions. In our opinion, these proposed initiatives should not proceed unless and until the State makes considerable effort to address the primary factors that businesses typically look at when deciding to locate in a particular jurisdiction. These factors include: infrastructure, incentives, cost of doing business, qualified employee base, quality of life, logistics, and, available real estate and growth capabilities. Construction of a facility, once a business assesses whether the other factors are favorable compared with other jurisdictions, is a relatively minor and later to be determined consideration in most cases.
While Delaware may rank high on having a low cost of doing business and a judicial system that is experienced and highly competent on corporate law matters, Delaware does not fare well with respect to some of the other important factors.
For example, a recent "report card" prepared by the American Society of Civil Engineers shows that Delaware is behind in most categories compared with the neighboring States of Maryland, New Jersey, Pennsylvania and Virginia. Similarly, a recent U.S. News and World Report article ranked Delaware as number 25 in infrastructure.
According to 2016 Census Bureau data, those with a Bachelor's degree had a median income of $67,300 and those with an advanced degree had a median income of $95,200. With the exception of Pennsylvania (32.3%), Delaware (32.7%) ranks the lowest for those residents with either a Bachelor's or Advanced Degree among the neighboring States.
Finally, the Association of American Railroads ranks Delaware the lowest in most of their categories compared with the neighboring States.
The proposed legislation, while obviously beneficial to developers, does nothing to address the above referenced factors that businesses typically consider when making decisions about where to locate their business. Making it easier to construct a facility will not matter if the primary factors businesses consider are not addressed and improved.
Moreover, if adopted, the lack of State involvement in the land use decisions made by local jurisdictions could and probably will result in the further diminution of the factors businesses consider important when making decisions about the location of their businesses. We urge you and your colleagues to focus instead on improving the primary factors businesses consider when deciding where to locate their businesses- At this time, making it easier for developers to circumvent established rules and regulations that probably need to be strengthened rather than weakened will simply not produce good results for anyone other than this special interest group.
Our Proposal - Long-term economic development
Our Proposal - Long-term economic development
To Reverse Brain Drain
To Reverse Brain Drain
Education - Future-oriented, UDel Satellite Campus in Western Sussex
Infrastructure - Air, rail, public transportation
Environment
Future Considerations for Economic Development:
Preparation for the future of the State of Delaware, not just for today's revenue and jobs, must be considered every time potential changes are contemplated. We (especially Sussex County) are badly in need of medical facilities (or even medical schools) and schools that churn out employees for tech jobs of the future. Our focus and energy must be spent on how to lure those industries and schools here, especially in Sussex County where its dependence on the aging population's huge retirement accounts from out of state will one day backfire.
We also must install a system to spot, encourage and support our young aspiring entrepreneurs to stay in Delaware.
Documents Supporting Our Proposal of Preparation for Future
Documents Supporting Our Proposal of Preparation for Future
https://www.usnews.com/news/best-states/delaware
From the attached rankings chart, in particular Education, Infrastructure, Crime and Natural Environment.
These are the areas where the State Legislatures need to focus on. As we discussed, the recent legislative initiatives are premature at best. Reducing or eliminating application procedures with the intent on creating an accelerated approval process for commercial construction (gas stations, local bank branch offices, etc.) will do nothing for the creation of a favorable environment for high quality businesses. Moreover, the fallout from improper approval of these applications will do the opposite and further worsen the factors quality businesses take into account when deciding where to locate their businesses. Finally, another gas station or bank branch office will not keep talented young people from fleeing the State to seek better and more rewarding employment.
These legislative initiatives appear to be nothing more than handing out candy to developers presumably in exchange for campaign financial assistance at the expense of the citizens of Delaware who will suffer for this not-too-subtle attempt to disguise their efforts as beneficial to the State of Delaware.
States Where Employers Are Struggling the Most in Hiring
States Where Employers Are Struggling the Most in Hiring
DE ranked #11 in job openings.
Question: Why do we need to deregulate and make it easier for run-of-the-mill employers to construct facilities at the expense of good planning and the environment when DE employers are currently having difficulty in filling the jobs they have now?
During the COVID-19 pandemic, millions of Americans lost their jobs and experienced financial difficulties due to unemployment. Now, for many employers, the shoe is on the other foot. Lots of businesses are struggling to hire enough workers, which has sometimes led to delays in services and reduced business hours. In fact, the labor force participation rate is still below pre-pandemic levels, and is at one of the lowest points in decades. Some businesses aren’t even able to keep the employees they already have – as Americans are quitting their jobs at record rates in what’s been dubbed the “Great Resignation.”
Within the U.S., workers are easier to find in some states than others. In order to see where employers are struggling the most in hiring, WalletHub compared the 50 states and the District of Columbia based on the rate of job openings for both the latest month and the last 12 months.
States Where Employers Are Struggling the Most in Hiring:
Ask the Experts
In order to get more insight on the current labor shortage, WalletHub turned to a panel of experts. You can click on the pictures of the experts below to read their bios and responses to the following key questions.
Why do employers have difficulties in filling employment positions?
What are the main factors that are influencing the high turnover rates in the labor market?
What will be the economic impact, if any, of this trend?
How can employers attract and retain employees during this troubling period?
In your opinion, will this imbalance in the labor market continue to be an issue throughout all of 2023 or will it get solved faster?
Maura J. Mills
Ph.D. – Associate Professor, Department of Management – The University of Alabama
Read More
Claretha Hughes
Professor of Human Resource and Workforce Development, College of Education and Health Professions – University of Arkansas
Read More
Christos A. Makridis
Digital Fellow, Digital Economy Lab – Stanford University, Human-centered AI Institute
Read More
Mitchell Langbert
Ph.D. – Associate Professor, Business Management, Koppelman School of Business – Brooklyn College
Read More
Ny Mia Tran
Ph.D. – Associate Professor & IOP Graduate Director, Department of Psychology – Springfield College
Read More
William J. Heisler
Ph.D. – Professor and Director, MSHRM Program; Editor-in-Chief, Journal of Human Resources Education, Sorrell College of Business – Troy University
Methodology
WalletHub compared the 50 states and the District of Columbia based on two metrics, the rate of job openings for the latest month and for the last 12 months. These metrics are listed below with their corresponding weights. WalletHub then used these metrics to rank-order the states and the District from those that struggle the most with hiring to those that struggle the least.
Job Openings Rate (Latest Month): Double Weight (~66.67 Points)
Job Openings Rate (Last 12 Months): Full Weight (~33.33 Points)
Sources: Data used to create this ranking were obtained from the U.S. Bureau of Labor Statistics.
These U.S. States Have The Most Startup Investment For Their Size
These U.S. States Have The Most Startup Investment For Their Size
Our neighboring states — PA, NJ, MD and VA --- have the most startup investment for their size.
(Delaware is hard to quantify for funding as many companies incorporate in the state but do not have a significant presence there beyond that. )
Venture capital investment is a major economic driver in some U.S. states. In others, it plays a much smaller role.
To get a sense of how states compare, we took a look at per capita venture funding across 26 states that receive $700 million or more in annual venture funding.
To put it mildly, differences were stark. Results ranged from a high of over $4,350 per capita (Massachusetts) to a low of $110 per person (Michigan). The median was around $300.
For the full state-by-state results, see the chart below:
Several data points call out for a bit more analysis. Some of the findings that stood out include:
Massachusetts’ lead is large: Notably, the standout state on the list is Massachusetts.
Although it actually ranks No. 3 for total venture funding (behind California and New York), the New England state of 7 million is by far the leader in per capita venture funding.
This isn’t too surprising. Boston and its environs, home to both Harvard University and the Massachusetts Institute of Technology, is a leading hub for biotech and deep tech. So far this year, the four largest funding recipients—health plan provider Devoted Health, e-commerce aggregators Thrasio and Perch, and identity-management provider Transmit Security—collectively pulled in over $4.2 billion.
California is way up there: The nation’s most populous state also does pretty well by the per capita metric, with just over $3,400 per person in annual startup funding. Of course, that doesn’t mean it all stays local, particularly given the rise in remote hiring and the propensity of California startups to build secondary hubs in lower-cost locations. Still, it’s an impressive haul and yet another reminder of the San Francisco Bay Area’s enduring prominence in all things tech.
New York continues to impress: Among the major American startup funding hubs, New York City has shown particularly strong growth in the past few years, and the state overall has been climbing the ranks. With more than $2,000 in per capita funding this past year, it’s clear the momentum is continuing.
Washington, Colorado and Utah outperform: Washington, Colorado and Utah are not particularly populous states, but they do have a lot of startup activity among them. The three Western states ranked in the top seven for per capita venture funding.
Vermont had a quirky year: So if you’re wondering why Vermont ranked so high, given that the state isn’t known for its thriving tech startup scene, it’s largely due to one company: Beta Technologies, a maker of electric vertical takeoff and landing aircraft. Burlington-based Beta raised over $500 million this year—which does a lot to boost per capita totals in a sparsely populated state like Vermont.
What about the other 24 states?
The remaining 24 states that we did not include in our per capita ranking aren’t home to the major U.S. startup investment hubs. However, among them, they do raise a big chunk of funding.
Overall, Crunchbase data showed that companies in the remaining 24 states collectively pulled in just shy of $3 billion in venture funding over the past 12 months not including Delaware, which is hard to quantify for funding as many companies incorporate in the state but do not have a significant presence there beyond that. The data does, however, include a number of big rounds this year for companies including:
BayoTech, an Albuquerque-based provider of low-carbon hydrogen that raised $157 million;
Lilac Solutions, a Rhode Island-based developer of ion exchange technology for lithium producers that raised $150 million;
Lovevery, an early-learning platform based in Boise, Idaho, that raised $100 million; and
Climavision, a Louisville, Kentucky-based weather intelligence platform that raised $100 million.
Broadly, the trend we’re seeing in the past couple years is venture capital spreading out across a wider swath of the country. This is boosted by the ability of founders to fundraise remotely and investors’ increasing willingness to back startups that are out of commuting distance.
Methodology:
Funding totals are based on Crunchbase data and include seed through late-stage venture rounds made between Nov. 5, 2020, and Nov. 5, 2021, as well as corporate venture investments and venture deals with stage not disclosed.
The 24 states not included in the per capita ranking are:
Alabama
Alaska
Arkansas
Delaware
Hawaii
Idaho
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Mississippi
Montana
New Hampshire
Nebraska
New Mexico
North Dakota
Oklahoma
Rhode Island
South Carolina
South Dakota
West Virginia
Wyoming
↩
VCs have spoken: the 10 US states dominating venture capital in 2021
VCs have spoken: the 10 US states dominating venture capital in 2021
Source: Frame Stock Footage/Shutterstock
NJ & PA in the top 10 — not Delaware
https://www.airswift.com/blog/top-us-states-vc-backed-2021
California, New York, Massachusetts, Texas and Washington lead the list but there are some surprise tech hubs emerging
Silicon Valley has lost some of its aurae due to many reasons affecting the region's economic environment. But it would be innocent to say that investors completely forsake SV. Although the Bay Area has become a highly competitive business environment, it still attracts startups, venture capital firms and talent.
In the last year's VC funding analysis, we saw California outperforming and new tech hubs rising, proving their worth in a pandemic period.
So, we extract from Pitchbook the largest venture capital investments of 2021 allocated in the US states to understand how the market is being shaped.
The top 10 US states VC-backed:
California showed its economic power last year by attracting no less than 97 billion dollars of venture capital investments, coming from a total of 396 deals.
New York and Massachusetts follow behind with the latter receiving $28bn from 133 deals, and the former, $22bn from 94 deals. But things start to get interesting when we look down the list and see the rise of new tech hubs like Texas, Washington...
To get a better overview, we create a map with that venture funding scenario in 2021 over the US.
The top deals from the top states
Many high-growth companies were selected and had generous funding in 2021. From healthcare services to cryptocurrency, these were the top deals that the highlighted states saw shaking their economy.
We observe that most investments continue to go to companies with technological merits. The organization may not have IT as its core activity, but it seems that tech will be a key factor of excellence regardless of the sector.
With that in mind, those regions strive to cultivate a business environment that favours the development of disruptive technologies. Let's look deep then and see how the year went and why for each of the top 10 states backed by venture funding.
1. California
Silicon Valley in California is the pinnacle of technology and needs no introduction. The largest deal in 2021 was the Series G venture funding for Robinhood. The round raised $3.4bn and was led by Ribbit Capital. With the influx of new investors into the stock market and cryptocurrency, Robinhood's investing platform has thrived during the pandemic and is now preparing for its IPO.
The tech area faces criticism for its high cost of living and predatory business environment, but still has the biggest role among the other tech hubs.
2. New York
Although the "Silicon Alley" term is now considered obsolete, it is always sexy to match the Big Apple with the "Silicon" brand. New York City is responsible for receiving most of the year's VC investments in the state (Only $100m went to Brooklyn).
The edtech, Articulate, raised $1.5bn in the largest VC New York deal of 2021. The General Atlantic fund led the deal. Its fully customizable e-learning software is one of the most pleasant tech surprises coming straight from New York City.
3. Massachusetts
Massachusetts has had a lot of buzz surrounding the investments in Boston and Cambridge.
We are talking about the state that has MIT and Harvard. And we can't also forget about Kendall Square, already cited as “the most innovative square mile on earth.” Commonly praised as the home of talented scientists, researchers and bioengineers, it's no surprise to see Commonwealth Fusion Systems as the great winner of the billion-dollar deal.
"I want some 29-year-old [graduate of] MIT to punch me right in the nose and say all of GE's technologies are wrong and you're about to lose. That's the challenge.”
Jeff Immelt, former CEO of General Electric, about moving the company's HQ from Connecticut to Boston in 2016.
4. Texas
Texas is undoubtedly one of the tech clusters that has been getting a lot of attention recently with companies like Hewlett-Packard Enterprise moving their headquarters to Houston. HP is forecast to open its new two five-story buildings in the spring of 2022.
Houston has many universities characterised as pools of talent, which is already an asset for companies established in the city like Amazon (HQ2). As the hub is taking shape, people are now calling Houston the "Silicon Bayou".
Cities like Austin are also being recognized as centres of innovation. Tesla has already transferred his HQ there, Oracle is another one on the way. Big venture capital firms like 8VC are also not left out on this move to Austin, aka "Silicon Hills".
Source: Frame Stock Footage/Shutterstock
The Dallas-Forth Worth area (Silicon Praire) is also a tech hub in Texas, emerging as a pioneer in biotechnology and life sciences. The company highlighted in our table, Vaxxinity, has its HQ in Dallas and is being praised as a developer in combating chronic disorders through prophylactic and therapeutic vaccines.
5. Washington
Home of tech giants (Amazon and Microsoft), Washington is a tech hub with two cities playing a significant role in the US economy: Seattle and Redmond.
The jewel of 2021 in the state was WEconnect Health Management. Provider of a rehabilitation progress tracking app, the company raised more than $1bn on December 22, at the close of the curtains of 2021.
It's very interesting to see the pattern followed in these tech clusters like Washington, which also has a large university (Washington University) nearby where tech trends arise.
6. New Jersey
New Jersey is not left out when it comes to innovation assets like prominent colleges. Princeton University is another birthplace of future industry change-makers. But another college equally crucial to the state's economy is the Stevens Institute of Technology, in Hoboken.
Hoboken, by the way, is a growing place in the US tech scene. It is where Celsius Network, the fintech that raised $750m in 2021, is based.
7. Pennsylvania
We can't talk about Pennsylvania, without highlighting Philadelphia. "Philicon Valley" is another technology centre in the United States that deserves attention. It has great potential with a number of universities like University City Science Center and Drexel University, located alongside the "Avenue of Technnology".
Gopuff is one of Philly's star companies, and, in 2021, raised $1.5bn in venture funding. The organisation is building its fame in the foodtech niche with affordable delivery for users.
8. Illinois
In terms of tech industry, Illinois is best known for its Illinois Technology and Research Corridor (I-88 Corridor), known as the home of big old companies and now the home of startups like STRATACACHE, Greenleaf Foods, viaPHOTON and et cetera.
It is there, in Chicago, where things are getting wild. The $1bn venture funding in VillageMD, a healthtech managing top care services, shows how the state and its favourite city can do to boost the US economy.
9. Colorado
Silicon Mountain (or Silicon Flatirons) is how the Denver metro area is being called.
The Denver Tech Center plays a vital role together with the University of Colorado in attracting everything a growing tech cluster wants: talent, venture capital and knowledge spillover culture. Denver and also Boulder are being filled with startups that can now, even more, reflect a culture of collaboration between different segments that today have technology as their industrial DNA.
Source: Frame Stock Footage/Shutterstock
Sierra Space, the company with the largest deal ($1.4 billion dollars) in the state, is based in Broomfield, a city located between Denver and Boulder. The aerospace tech reverberates the ambition present in this region to open the path to new emerging sectors like quantum technology.
10. Florida
The Tampa Bay area, Miami...Florida is another one well-served to arise as a new tech cluster.
Recently, in Miami, we saw the creation of the South Florida Tech Hub, a welcome initiative to foster networking, support with advocacy, produce events and help with more educational content.
It's only a matter of time before we see more companies like Plant-Ag receiving a precious investment like the one in 2021. The company has an ambitious goal to track your food from field-to-plate. But with the $800 million dollars raised it became easier to do this innovation in the supply chain segment.
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In addition to three strategic offices in key emerging hubs (Denver, Houston and Austin), we have business experience all across North America.
Being part of an emerging tech cluster is an incredible opportunity to grow together with the help of a propitious economic environment.
Want more insight into talent trends in the technology industry? Click the link below to download our latest whitepaper.
Decision-Makers, Drivers, and Inner Workings of the Location Selection Process
Decision-Makers, Drivers, and Inner Workings of the Location Selection Process
Those charged with making the location decision look to satisfy the company’s long-term goals, while achieving a return on the investment and minimizing risk.
Those charged with making the location decision look to satisfy the company’s long-term goals, while achieving a return on the investment and minimizing risk.
Lawrence Moretti, Principal, LFM Corporate Location Solutions
The location selection process is a vehicle to bigger corporate goals. Ultimately, these decisions are less about communities, real estate, quality of life, and the local workforce, and more about shareholder value, market growth, competitive solutions, customer service, and operating efficiency.
In some companies, siting decisions are centralized and require executive-level approval; in others, these decisions are made and authorized at a business-unit level. Ideally, and typically in larger companies, siting decisions are aligned to a broader location and real estate portfolio strategy, framed by business needs, workforce planning, and real estate demand management.
Let’s look at some of the underpinning drivers of location selection decisions and some of the key players involved:
Perspectives
At the C-suite level, location strategy and site selection decisions are:
Long-term investment decisions
Trade-offs of risk, cost, and opportunity
All about value-add to the bottom line
Long-term investment decisions: In some industries with long lead times and high capital investment prior to commercialization — the pharmaceutical and aerospace industries are notable in this regard — a new site represents a major upfront investment that may not pay back for years to come. More fundamentally, the siting requirements and specifications may be based on predictions of customer orders and product success that may not reap revenue for years to come. Decision-makers will be focused on elements such as coordinating project timing to match product delivery, phasing of the investment, and mitigating the impact of the upfront financial hit. Perhaps most important, they need to know whether the talent pool is scalable and sustainable to achieve product innovation, quality, and other factors of market success. Flexibility in the location’s ability to satisfy evolving project requirements will also be critical.
Location investments are big decisions, with serious resources, risks, capital, and opportunity costs.
Even for less capital-intensive industries, the lead-time and alignment with predictions of market growth and supply chain requirements become critical parameters. Consultants and internal site selection teams will be focused on developing a feasible business case for the investment, driven by the payback and upfront financial hurdles.
Trade-offs of risk, cost, and opportunity: Every location decision is about a trade-off or choice point. An obvious one, for example, is a choice between minimizing lead time by selecting an existing building or shovel-ready site in Location A versus what might be a better long-term site solution or labor market in Location B. The classic trade-off is cost versus operational advantage — at what price point does the company need to be positioned to attract the talent it needs in Location A versus Location B? Every decision point has a consequence — optimizing the advantages and minimizing the risks drive the right solution.
Value-add to the bottom line: Sound business decisions are ultimately about additive value to the company and its shareholders. Being in a location with a sustainable talent pool will contribute to company value by enabling innovative solutions to customers. Payroll represents the biggest operating expense in most companies and, as such, geographic variability in labor costs and labor regulation become critical location selection factors. But costs do not necessarily equal value. Decision-makers may accept higher costs — if that is what it takes to find the best talent to meet company objectives. Value-add trumps cost.
Expand
There are typically four groups of stakeholders involved in location decisions: the corporate internal organization, external corporate affiliates, community interests, and business attractors.
Costs Are Critical, But in Context
Rarely are site selection decisions all about costs…and sometimes company management downplays costs, but ultimately, management nearly always drives toward a cost-effective result. Here is a description of how “cost” weaves through the cadence of stages in the decision-making process in terms of thresholds, alternative solutions, and decisions.
The threshold stage is often cost-driven. Screening to a manageable group of locations from a universe of hundreds of potential places is an exercise in efficient resource utilization — finding the needle in the haystack requires sifting through a lot of straw that looks the same. In siting a facility, cost is one of the first qualifiers, and typical site selection threshold criteria might read as “consider only metro areas with an average wage of 90 percent of the national average or 75 percent versus our current labor markets.”
The solution stage is typically value-based: Once a reasonably small pool of candidate locations is identified, the decision team can concentrate limited resources on finding the right set of alternative location solutions that best fit company objectives. Relative to selecting a business location, value from the company decision-maker’s perspective is about satisfying business objectives at an acceptable level of start-up and operating costs and determining which location solution does this best.
Costs do not necessarily equal value. Decision-makers may accept higher costs — if that is what it takes to find the best talent to meet company objectives. Value-add trumps cost.
The decision stage is based on a sound business case: This is when the company’s site selection team needs to, if you will, “sell the solution” internally…perhaps to the CEO, CFO, COO, head of real estate, and those who may be asked to relocate. The business case must be based on a sound, documented methodology that demonstrates tangible benefit to the company, satisfies investment hurdles, and minimizes potential risk.
A Framework for Location Decisions
Here is one of several simple tools to evaluate how alternative locations satisfy company objectives and which location provides the strongest business case. It consists of three sets of factors that help determine the best location for a particular project. Factors within each dimension can be weighted to develop a score for each dimension, with each location plotted to the scores.
The dimensions are:
Performance factors such as talent, workforce scale, business climate, access, and other operational drivers
Financial return including net present value, return on investment, upfront cost hurdles, and other economic measures
Delivery factors including site, infrastructure availability, and other factors to determine how quickly the project can be up and running
Companies (and their consultants) will typically use tools like this to guide the decision process and identify gaps in desired locations that might be mitigated through the application of incentives — leading to commitment at a preferred location.
Parties to the Location Decision
There are typically four groups of stakeholders involved in location decisions: the corporate internal organization, external corporate affiliates, community interests, and business attractors.
Within the corporate organization, the decision rests with those who have the authority to take action, whether at the executive, VP, or manager level. However, there are other internal groups who will influence or gate-keep the decision process. These range from end-users (such as affected employees) to endorsers (helping to build support). Of course, the project team is at the center of developing the solution and business case to management. This team might consist of representatives from corporate real estate, human resources, finance, and the operational and technical experts specific to the project.
Other external affiliates — such as customers, suppliers, and strategic partners — play an important role too. Service-level agreements and other arrangements may play an important part in the location decision. In some industries (financial services, government contracts, and pharmaceuticals come to mind), there may be regulatory requirements and stakeholders that place constraints on where to locate.
Community interests may become involved as well, particularly for large or otherwise highly visible projects (for example, those with significant employment impact, large capital investment, unique talent requirements, or prestige). On the opposite end of the spectrum, some projects may not be perceived as desirable due to environmental or other controversial aspects. In either case, the political arena enters into the equation, and this becomes the linkage point to negotiating incentives and/or mitigations for the project. Those involved with project permitting (site, zoning, construction, environmental, etc.) are part of this group as well.
Key partners throughout are the business attraction professionals and allies who market the community, support delivery of the project, and, more fundamentally, help to shape the economic development “product” of the location, i.e., infrastructure, workforce, business climate, quality of life, and other attributes that define the “place.” These include economic development professionals, chambers of commerce, the local real estate community, utility providers, employers, educators, and others who play a role in shaping and promoting the business attributes for investment in the location.
Aligning all of these interests makes for a successful location decision and transition to starting up a new or expanded operation.
Closing Thoughts
This brief review has presented some perspectives around how location selection decisions are made, by whom, and the factors of importance to company leadership. In sum, location investments are big decisions for companies, with serious resources, risks, capital, and opportunity costs in play. Those charged with making these decisions care about:
Benefit and opportunity in achieving company goals
Financial hurdles and investment return
Delivery and project start-up when needed
They are less specifically concerned about traditional site selection factors other than how these enable broader corporate imperatives and add value to the company’s bottom line.
https://www.epi.org/publication/states-education-productivity-growth-foundations/
A Well-Educated Workforce Is Key to State Prosperity
A Well-Educated Workforce Is Key to State Prosperity
Report • By Noah Berger and Peter Fisher • August 22, 2013
What can state governments do to boost the economic well-being of their people? That is the central question of state economic policy. Incomes and wages can increase across an economy when productivity—production per capita—increases. States have many tools in their arsenal to increase productivity, including investments in public infrastructure, in technological innovation at public universities and other institutions, and in workers through the education and training systems. But many states have been retreating from their responsibility to ensure state economic growth that benefits all residents in favor of a short-sighted approach to economic development. In these states, the focus is on luring employers from other states with strategies that do not lead to rising incomes because they do not make the workforce more productive. Even worse, the focus drains resources from the most important, proven, path to increasing productivity: investments in education.
Major findings of this report include the following:
Overwhelmingly, high-wage states are states with a well-educated workforce. There is a clear and strong correlation between the educational attainment of a state’s workforce and median wages in the state.
States can build a strong foundation for economic success and shared prosperity by investing in education. Providing expanded access to high quality education will not only expand economic opportunity for residents, but also likely do more to strengthen the overall state economy than anything else a state government can do.
Cutting taxes to capture private investment from other states is a race-to-the-bottom state economic development strategy that undermines the ability to invest in education.
States can increase the strength of their economies and their ability to grow and attract high-wage employers by investing in education and increasing the number of well-educated workers.
Investing in education is also good for state budgets in the long run, since workers with higher incomes contribute more through taxes over the course of their lifetimes.
Introduction: Education suffers as state economic development wars escalate
Introduction: Education suffers as state economic development wars escalate
Historically, U.S. economic growth and prosperity have been achieved through an implicit partnership of federal, state, and local governments, a partnership that worked astonishingly well for a period after World War II. The federal government provided overall economic stability and sought to ensure that the economy never veered too far from full employment.1 State and local governments assumed primary responsibility for the education system that produced a more skilled and productive workforce. Federal and state governments both invested in infrastructure, and in basic research that provided enormous long-term benefits for the private sector. The end result was a long period of postwar productivity growth, the prerequisite for growth in the standard of living.
During the 1970s and 1980s, state and local governments across the country became convinced that they should play a more aggressive and expansive role in economic policy (Fisher and Peters 1998). Economic development became accepted as a major function of state and local government, and came to mean the direct promotion of private investment within the borders of a state or city. This led to escalating competition for a limited supply of private capital investment through increasingly generous incentive packages.
While cutting costs to business has become the principal focus of economic development policy in many states, more and more states are cutting programs across the spectrum to lower state taxes. In many cases these ideas are promoted as a way to attract employers from other states—to steal jobs by offering incentives to business leaders. But the preponderance of evidence has shown that in the long run these strategies are inefficient and ineffective (Fisher 2013; Mazerov 2013; Lynch 2004). State and local taxes on business are simply too small a share of total business costs to play a significant role in location decisions; other factors—labor skills, wages, access to inputs and markets—are much more important. Yet business tax breaks are expensive, and take money from investments in education and infrastructure that increase productivity and support growth.
And as public resources are squandered on unproductive state efforts to capture private investment at the expense of other states, it becomes more difficult to fund the kind of education system innovations needed to raise U.S. educational performance up to the levels of other advanced industrial societies. Furthermore, investments in public research universities are important to enhancing the nation’s rate of innovation as basic research is spun off in new private ventures, and to maintaining or recapturing our leadership role in new technologies. Inadequate investments in education weaken the ability of a state to develop, grow, and attract businesses that offer high-skilled, high-wage jobs.
Strong state education systems are good not just for the national economy; they are good for the citizens of the state. Ultimately, state economic policies seek to improve the lives of the people in the state, which means creating conditions in which people can get jobs that pay enough to support a family and provide economic security. This leads to a virtuous cycle, as working people who can afford to buy goods and services support local businesses and the local economy.
The connection between education and income is strong. A high school diploma, technical college certificate, or college degree not only increases one’s skills and productivity, but signals to employers that the individual is motivated and completes tasks. A more educated individual is more likely to participate in the job market, to have a job, to work more hours, and to be paid more, and less likely to be unemployed (French and Fisher 2009). But the benefits of education go beyond the economic returns. Higher levels of education also correspond to improved health and lower rates of mortality, and lower rates of crime (Grossman and Kaestner 1997; Lleras-Muney 2005; Lochner and Moretti 2004).
Research has also shown that greater parent education correlates positively with children’s health, cognitive abilities, and academic achievement (Wolfe and Zuvekas 1995; Haveman and Wolfe 1995; Smith, Brooks-Gunn, and Klebanov 1997). The children of more highly paid workers are also less likely to grow up in poverty, less likely to be poor as adults, and more likely to be better educated and paid as adults, and therefore less likely to rely on food stamps or other public assistance (French and Fisher 2009; Duncan, Kalil, and Ziol-Guest 2008). The benefits of a more educated population accrue not just to the more educated workers, but to future generations and to the broader society.
The productivity-education link
The productivity-education link
The best way to measure whether an economy is working is to look at whether the incomes of average people are increasing. To achieve rising incomes for average people, two things need to happen: productivity needs to increase (creating more income overall), and new income generated from their increased productivity needs to be returned to workers in the form of higher wages.
Ensuring the fair distribution of the rewards of productivity growth is primarily a federal responsibility, through such things as strong labor laws, fair trade policies, and monetary and fiscal policies that encourage full employment. There are some steps states can take in this area, such as maintaining strong labor standards, including minimum wage laws that protect the lowest paid workers.
Where states have the greatest role to play, however, is in making sure that all of their people—and particularly in those from the most disadvantaged backgrounds—have the tools to be highly productive. Education is the key to that, as are other things that make learning possible, such as making sure children have decent health care and sufficient nutrition. Reducing poverty itself has also been shown to improve the ability of children to thrive (Marr, Charite, and Huang 2013).
Evidence suggests that states that increase the level of education of their workforce see greater productivity. As shown in Figure A, between 1979 and 2012, states in which the share of adults with at least a college degree experienced greater increases in productivity, measured as gross state product per hour worked.
Figure A
Productivity has grown more in states with greater growth in the educational attainment of their workforceRelationship between state productivity growth and increase in college attainment from 1979 to 2012
Source: EPI analysis of unpublished total economy productivity data from the Bureau of Labor Statistics (BLS) Labor Productivity and Costs program, state employment data from BLS Local Area Unemployment Statistics, and college attainment data from the Current Population Survey basic monthly microdata
There is also evidence that greater productivity is associated with higher wages. Figure B shows that between 1979 and 2007, states with larger increases in productivity experienced larger increases in median worker compensation.
Figure B
Worker compensation has increased more in states with greater increases in productivityRelationship between change in state median worker compensation and productivity from 1979 to 2012
Source: EPI analysis of unpublished total economy productivity data from the Bureau of Labor Statistics (BLS) Labor Productivity and Costs program, state employment data from BLS Local Area Unemployment Statistics, state compensation data from the Bureau of Economic Analysis State/National Income and Product Accounts public data series, and wage data from BLS Current Population Survey (CPS) Outgoing Rotation Group microdata
Education, wages, and state economic success
Education, wages, and state economic success
The previous section established the link between education and productivity, and productivity and wages. We can further test the assumed link between education (and, alternatively, tax rates) and wages by reviewing correlations between certain characteristics and high-wage state economies. We focus on the median wage (which includes hourly wages and salaries converted to an hourly basis) as the most appropriate measure of state economic success for several reasons. It should be the goal of state development policy to raise the standard of living, which requires both improvements in productivity and that the gains from productivity (how much output is generated by the economy in each hour of work) be shared with workers in the form of higher wages and salaries. Productivity improvements that only enhance profits will benefit only those at the top of the income and wage distributions. And average wages, as opposed to median wages, will rise even when all the gains are captured by those at the top. Indeed, national data reveal that the increasing concentration of profits and wage growth at the top is behind the growing “wedge” between productivity growth and median wages in the United States (Mishel et al. 2012). Yet even despite this growing wedge, higher rates of education are strongly predictive of higher median wages across states (as shown below).
We use wages rather than income because wages are directly affected by state efforts to increase labor skills while investment income could derive from ownership of assets anywhere in the world. Furthermore, for most of the population, improvements in wages are the principal, if not the only, path to improving income. We do not use growth in jobs or in output (state GDP) because an increase in jobs or in output does not necessarily translate into an improved standard of living; an influx of low-wage jobs can drive down average pay, and an increase in output can occur with little increase in employment or wages if it comes about through substituting capital for labor.
Our analyses allow us to answer several important questions. First, “are high-wage economies more common in low-tax states?” The answer, as shown in Figure C, is “no.”
Figure C
There is no significant correlation between overall tax levels and high-wage economiesMedian hourly wage, and state and local taxes as a share of state personal income, by state, 2010
Source: Authors' analysis of Current Population Survey Outgoing Rotation Group microdata and Tax Policy Center's Tax Facts data
The figure shows no clear relationship between state taxes (as a share of state personal income) and median wages. Higher-tax states appear to have slightly higher median wages, but that correlation is not significant.
One conclusion from this chart could be that it is very unlikely that we would ever see a clear pattern when looking at wages across all 50 states—because states are so different in so many ways.
Testing the accuracy of this conclusion leads to our second question: “Is there a factor that does show a strong correlation with high-wage economies?” The answer is “yes.”
Overwhelmingly, high-wage states are states that have a well-educated workforce, evident in Figure D. The correlation is very strong and there are very large differences between median hourly wages in states with well-educated workforces and hourly wages in states with less-well-educated workforces (as measured by the share of workers who have at least a bachelor’s degree). In the 22 states with the least-educated workforces (30 percent or less with a bachelor’s degree or more education), median wages hover around $15 an hour, the only exceptions being Alaska and Wyoming. In the three states where more than 40 percent of the population has a bachelor’s or more education, median wages are $19 to $20 an hour, nearly a third higher. For a full-time, full-year worker, a median wage of $15 versus $20 an hour means the difference between making $30,000 a year and making $40,000 a year. For a household with one person working full time and one person working half time, it is the difference between making $45,000 a year and making $60,000 a year.
Figure D
Median wages are substantially higher in states with better-educated workersRelationship between state median hourly wage and share of state's workforce with a bachelor's degree or more education, 2012
Source: Authors' analysis of Current Population Survey (CPS) basic monthly and CPS Outgoing Rotation Group microdata
In addition to the magnitude of the differences between states there is also a striking consistency: There are no states with a relatively well-educated workforce and relatively low wages and virtually no states with low levels of education and relatively high wages. There are two outliers: Alaska and Wyoming. Their locations on the graph suggest that states with valuable natural resources and a very limited number of people may be able to offer reasonably high wages without a well-educated workforce. In the case of Alaska, it may also be a matter of being forced to offer high nominal wages to attract workers because of the high cost of living.2 But these are clearly special cases.
In some ways, the correlation between wages and education should not be surprising. For an individual, annual earnings rise with increasing education, as shown in Figure E. Higher median annual earnings for those with more education reflect not just higher hourly pay, but more stable employment and fewer periods of unemployment.
Wages are higher for better-educated workersMedian annual earnings of U.S. workers, age 25+, by education, 2011
Created with Highcharts 4.0.3$20,329$28,659$36,853$49,648$60,709High school dropoutHigh school graduateAssociate degreeBachelor’s degreeMaster’s degree020,00040,00060,000$80,000
Source: Current Population Survey, 2012 Annual Social and Economic Supplement
It makes sense that if an individual’s wages increase with education, then wages across an economy likely increase as more people have higher levels of education. Businesses that need well-educated workers, and pay the wages such workers earn, will grow and prosper in states that have such workers and may be forced to leave states that don’t.
While this correlation between education and high-wage jobs is not surprising, what perhaps should be surprising is how often policymakers ignore it and pursue other quick fixes, such as special tax breaks or other subsidies for businesses. Looking at the correlation between education and wages, there is little indication that states have found a way to create a high-wage economy without a well-educated workforce.
Interestingly, this was not always the case. If we turn back the clock to the late 1970s, we see a very different picture, represented in Figure F. Alaska is again an outlier. But behind Alaska, the highest-wage state was Michigan, which didn’t have a particularly well-educated workforce. Ohio and West Virginia also had reasonably high wages but not well-educated workforces. At the other end of the spectrum, many states with more well-educated workforces didn’t have particularly high-wage economies. We had a very different economy in the 1970s and the wage premium for a college degree (the gap between wages of college and high school graduates) was much smaller. It then grew significantly in the 1980s and 1990s (Mishel et al. 2012, Figure 4N).
Figure F
There was a much weaker correlation between education and wages as recently as 1979Relationship between state median hourly wage and share of state workforce with a bachelor's degree or more education in 1979
Source: Authors' analysis of Current Population Survey (CPS) basic monthly and CPS Outgoing Rotation Group microdata
Additionally, Figure F shows higher median wages in states with strong labor unions: Michigan, Ohio, Pennsylvania, Wisconsin, California, and New Jersey, for example. Historically, there has been a strong correlation between union density—the percent of a state’s workforce represented by a union—and state median wages.3 Today there are no states with the levels of union density that the high-wage states had in the late 1970s. Not surprisingly, the share of corporate revenue that is paid in wages rather than distributed in profits has declined significantly (Jacobson and Occhino 2012). Unions now represent a much smaller share of the workforce than they did in the decades immediately following World War II and so are not the force that they were for creating middle-class jobs for large numbers of workers with a high school education or less.
Education as smart economic development policy
Education as smart economic development policy
Does the correlation between education and earnings necessarily mean that states can strengthen their economies in the long run by adopting policies that increase the number of well-educated workers? Recent academic work suggests that the answer is, “Yes.” A study by Federal Reserve economists examined the factors contributing to greater state prosperity over a 65-year period and found that a state’s high school and college attainment rates were important factors in explaining its per capita income growth relative to other states between 1939 and 2004 (Bauer, Schweitzer, and Shane 2006).
Increasing educational attainment can be achieved by a variety of policies and programs, including those that increase access to postsecondary education by restraining tuition growth or increasing financial aid, reduce high-school drop-out rates, move people without high school degrees through GED and associate degree programs, increase the quality of K-12 education to improve success of high school graduates in postsecondary education, and offer preschool programs that lead to long-term improvements in educational outcomes.
An evaluation of the effectiveness of alternative education strategies is beyond the scope of this report. But there is evidence that state expenditures on primary and secondary education improve school performance and raise state per capita income. For example, investments in school facilities led to improvements in student test scores (Cellini, Ferreira, and Rothstein 2010). And over a 34-year period, states that improved their position relative to other states on real per-capita education spending improved their relative position in real per-capita income, and the direction of causality was from education spending to income (Bensi, Black, and Dowd 2004). Also, the long-term benefits of early childhood education programs have been well documented (Lynch 2007).
Some state officials may be tempted to ask, “What good would it do to produce more college graduates if better-paying jobs for college graduates are not available?” “Shouldn’t the state focus on attracting higher-skilled jobs instead of creating more skilled workers who have to leave the state to find work?” But in this instance, if not in most others in economic policymaking, increased supply can actually help create its own demand. As Bartik has put it, “An increase in the labor supply probably stimulates labor demand by at least two-thirds the supply increase. This is because additional labor attracts employers, and additional higher-skilled labor attracts employers with more skilled jobs” (Bartik 2009). To a degree then, the answer to these concerns is, “If you educate them, jobs will come,” though national strategies to increase the demand for skilled workers may also be needed.
Education investments are good not only for a state’s economy and residents, but also for a state’s budget in the long run. This may seem counterintuitive since education is a large share of state-financed expenditure—typically over half if including postsecondary education and state aid to K-12 school systems.4 But education investments can pay off for the state in the long run. The majority of students graduating from state schools will remain in the state over their working lives, and as a result of being better trained, will have better jobs. This means they will earn more and stay employed at a higher rate, paying more income and sales taxes and relying less on state assistance programs. There is evidence that every additional student who gets an associate or bachelor’s degree instead of stopping formal education after graduating from high school will, over his or her lifetime, return to the state, in the form of higher taxes, substantially more than the cost of their education. This means that scholarships or other programs that lead more students to higher education can more than pay for themselves, even if a third of the graduates leave the state (French and Fisher 2009). The overall returns from investments in early childhood education mean that such investments will generally pay for themselves (Lynch 2007).
States would do well if they focused their resources on their historic role as the guarantors of high quality education for all, while broadening the scope of that role to include universal preschool and other early childhood education programs, and beginning to view high quality postsecondary education and training as the standard for all students. In most states that would mean reversing recent cuts to, and even elimination of, publicly funded preschool,5 and declines in public investments in postsecondary education. From 1990–1991 to 2009–2010, real funding per student at public colleges and universities declined 26 percent, and the share of state personal income going to higher education fell 30 percent, while tuition at four-year institutions more than doubled and at community colleges rose 71 percent (Quinterno 2012). Instead of improving access to higher education in response to the needs of a changing economy, most states have restricted it.
Conclusion
Conclusion
Ultimately, the wealth of a society can increase only if the economy becomes more productive. A more productive economy can support both higher wages and higher profits, as well as shorter work weeks and a higher quality of life. So the question of how to increase productivity needs to be at the center of any debate about state economic development.
As this paper shows, moving jobs from one state to another state does nothing to increase productivity. Rather, productivity rises with investments in infrastructure and workers, with investments in education that raise educational achievement providing a major boost. Thus, investing in education is a core contribution states can make to the well-being of their residents and the national economy overall.
At the same time, increasing productivity does not by itself guarantee that the resulting economic gains will be broadly shared. At the national level, productivity and wages grew hand in hand from the end of World War II until the early 1970s (Mishel et al. 2012). But since then, wages have largely stagnated while productivity has continued to rise. From 1973 to 2011 productivity increased 80.4 percent while real median hourly compensation (wages and benefits) of production/nonsupervisory workers in the private sector grew just 10.1 percent (Mishel et al. 2012, Figure 4V). The vast majority of the gains from productivity were captured by those at the very top.
While national policies will have to play the major role in creating a national economy in which economic growth leads to incomes rising across the income spectrum, there are measures that states can take to strengthen the ability of working people to participate fully in the gains from economic growth. These include restoring state minimum wages to the real level that prevailed in the late 1960s, aggressively addressing problems of wage theft and employee misclassification, adopting higher wage standards in economic development programs, and other measures.
But most importantly, states can build a strong foundation for economic success and shared prosperity by investing in strategies that make their people more productive, chief among them education. Providing expanded access to high quality education and related supports—particularly for those young people who today lack such access—will not only expand economic opportunity for those individuals, but will also likely do more to strengthen the overall state economy than anything else a state government can do.
About the Authors
About the Authors
Noah Berger is president of the Massachusetts Budget and Policy Center, an independent research organization that analyzes state budget and tax policies, as well as economic issues that affect low- and moderate-income people in Massachusetts. Prior to joining the center, Berger served as counsel and policy director for the Massachusetts Senate Committee on Ways and Means from 1993 to 1996 and as policy director for Massachusetts Senate President Tom Birmingham from 1996 to 2002. Berger’s leadership extends to the national arena, where he serves on the board of directors for Public Works, on the advisory board of the Tax Policy Center, and on the EARN advisory group. Berger graduated from Harvard College and has a J.D. from Harvard Law School.
Peter Fisher is the research director at the Iowa Policy Project. Fisher is a national expert on public finance and has served as a consultant to the Iowa Department of Economic Development, the State of Ohio, and the Iowa Business Council. His reports are regularly published in State Tax Notes and refereed journals. His most recent book is Grading Places: What do the Business Climate Rankings Really Tell Us, 2nd edition, published in 2013 by Good Jobs First. He has authored or co-authored the majority of Iowa Fiscal Partnership reports and guest opinions on state tax policy. Fisher is professor emeritus of Urban and Regional Planning at the University of Iowa. Fisher has a Ph.D. in economics from the University of Wisconsin-Madison.
Endnotes
Endnotes
1. An economy has reached full-employment when any further increases in aggregate demand would fail to reduce the unemployment rate. Note that this, of course, does not mean the unemployment rate will be zero —some degree of “frictional” unemployment (temporary unemployment as workers move between jobs and move from out of the labor force into paid employment) and “structural” unemployment (a mismatch between workers demanded by employers and those available in any given local labor market) will always persist. The Employment Act of 1946 called for the federal government to maintain full employment, and fiscal and monetary policy in the ensuing postwar period was used to attain that goal while keeping inflation low. In more recent decades, concern with inflation has often taken precedence over unemployment in Federal Reserve monetary policy, and the effectiveness of fiscal policy to stimulate the economy has been challenged by those who would shrink government at all costs.
2. According to the Bureau of Economic Analysis, Alaska has the ninth highest cost of living (Aten, Figueroa, and Martin 2012).
3. In 1979, for example, the correlation between state union coverage and state median wage was .67. Union coverage by state and year comes from the Current Population Survey and can be found at unionstats.com (Hirsch and Macpherson 1979). Median hourly wage data are also from the Current Population Survey as analyzed by the Economic Policy Institute.
4. In 2011, expenditures for education accounted for 36 percent of total state government expenditure in the United States, but 56 percent of state own-source revenue (U.S. Census Bureau Annual Survey of State Government Finances 2011)
5. “Of the 39 states with some form of public pre-K program, about half have cut spending since the start of the recession” (Knafo 2012). Per pupil spending on preschool programs has been on the decline for a decade (Barnett et al. 2011).
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