Failed government policies must be abandoned to revive PA economy
The labor union-funded Keystone Research Center recently released a report entitled The State of Working Pennsylvania 2004 which reached the completely unsurprising conclusion that “Pennsylvania ‘s economic recovery has taken longer and been even weaker than the nation as a whole.”
That hardly ranks as news. Neither does the KRC’s attempt to blame the commonwealth’s dismal economic performance on Bush Administration policies, along with advancing arguments for more big government solutions which are, in fact, the real cause of the problem.
Steve Herzenberg of the KRC predictably placed the blamed for Pennsylvania’s poor economic performance on the federal government’s tax cuts. Since the manufacturing sector nationwide is improving at a more rapid pace than here in Pennsylvania, it only stands to reason that state policies, rather than federal policies, are the root cause of the commonwealth’s woes.
He also renewed organized labor’s annual call for an increase in the minimum wage. But the fact of the matter is, minimum wage increases typically result in fewer jobs and higher unemployment. Dr. Shawn Ritenour, Associate Professor of Economics at Grove City College points out that: “If a worker’s contribution to a firm is such that his output brings in revenue of $5 for every hour of his output, the business cannot afford to pay him any more than that and still break even.” If forced to pay more, the business loses money and ceases to exist causing “mass unemployment for relatively less skilled workers.”
Rather than return to the failed policies of the past advocated by the Keystone Research Center, Pennsylvania’s economy can be put on the path to recovery by trying a different approach: adjusting policies so that market forces, rather than artificial government regulations become dominate.
The first step down such a path would be to enact a Right to Work law. Forbes Magazine ranks Pennsylvania 45 th in the nation in economic vitality. The five states which scored lower than Pennsylvania are also non-Right to Work states. Conversely, eight of the top ten best areas in which to do business are in states with a Right to Work law. It is obvious the compulsory unionism prevalent in Pennsylvania serves as a serious deterrent to job creation.
Another strong negative for Pennsylvania is taxes. In ten years of polling the business sector, the Lincoln Institute has consistently found taxes to be at or near the top of concerns. Specifically, the state’s antiquated and unfair property tax structure drives away business. Further, arcane though it may be, without the phase out of the Capital Stock and Franchise Tax, sustained manufacturing growth in Pennsylvania is just not possible.
After taxes, the most often cited problem with doing business in Pennsylvania is complying with the state’s daunting labrynith of regulations. Kevin Shivers, State Director of the National Federation of Independent Business correctly points out that “Day-in and day-out, small business owners must focus on dealing with costly and time consuming regulations. Reducing bureaucratic red tape would allow business owners to focus on growing their businesses and creating jobs.”
Such regulatory relief is included in a package of proposed legislation that would also reform Worker’s Compensation and Unemployment Compensation, create Healthcare Savings Accounts, provide relief from lawsuit abuse, and provide tax credits for career development. All are free market, and virtually cost-free approaches that would dramatically improve Pennsylvania ‘s economy.
Jim Panyard, President of the Pennsylvania Manufacturers’ Association, succinctly summed up the situation saying: “Although there are problems facing all U.S. manufacturers, the decisions made in Harrisburg have a critical effect on Pennsylvania’s competitiveness relative to our neighbors in other large industrial states.
That’s the mind-set that will have to be adopted before Pennsylvania can truly begin to emerge from its economic quagmire.