Fostering Job Growth In Ohio

By Edwin Richard "Rick" Smith, III

A 5-step program to jump-start Ohio's economy.

The Ohio economy is in trouble. Job growth in Ohio since the Republicans took over the governor's mansion in 1991 has lagged well-below the national average (13% vs. 22%). Luckily, the Cincinnati region has done much better than the state as a whole (25% growth). Other parts of the state have not been so lucky (Note: all employment data comes from the U.S. Bureau of Labor Statistics).

Republican leaders will tell you that the economy is robust. In fact, it should be, with the huge stimulus of budget deficits and war spending. Unemployment stands at a relatively low 4.6% nationally and 5.2% locally. Then why doesn't the economy "feel" robust?

Partly because unemployment numbers can be misleading, as they don't count people who are discouraged and have stopped looking for work. While the unemployment rate is just 0.4% higher than when George Bush took office in January 2001, the actual percent of people age 16+ who have jobs is 1.3% lower than it was in January 2001.

Since January 2001, Ohio has lost 1 in 5 manufacturing jobs. Through December 2005, the number of Ohio jobs fell 1.2% while increasing 1.4% in the nation as a whole. What is the Ohio Legislature doing about job growth?

Not a lot.

Let's build a solid foundation for job growth in Ohio. There is too much focus on the immediate crisis: winning the next Honda plant or keeping jobs from going to China. These are the things you get when you have done the hard work to make Ohio attractive to both employers and employees. As our fearless leader says "This is HARD work". It has to be a multi-faceted investment.

My 5-prong plan for job growth in Ohio includes the following:

• Raise the Minimum Wage
• Fix Healthcare Availability and Costs
• Fix Education
• Develop an Industrial Plan and Implement it
• Hold Companies Accountable for Incentives

• There should be a constitutional amendment on the ballot this November which would raise the Ohio Minimum Wage from $5.15/hr. to $6.85/hr. and then increase it every year for inflation, so it would never lose its buying power. There are many Republicans who have told me that raising the Minimum Wage would reduce the number of jobs in the Ohio economy. Actually, raising the minimum wage would BOOST the economy.

• The Dayton Daily News reported on 5/11/06 that the 11 states with a minimum wage higher than the federal rate had higher rates of small business growth between 1997 and 2003 than other states.

• The jobs earning minimum wage are not jobs which can be outsourced. They are not the manufacturing jobs - they are the janitors, the hotel cleaning personnel, waitresses, and store clerks. No one is shipping these jobs overseas...or across the river.

• If you believe that George Bush's $600/family tax rebate was good for the economy, than you should believe that a minimum wage increase will boost the economy. The non-profit research organization, Policy Matters Ohio, estimates that 719,000 workers (14% of Ohio's workforce) will receive some increase in wages if the proposed Constitutional Amendment is passed. These workers are spending every dime they have, and they will spend the extra money in their paycheck as well. This money will surge through the economy and raise employment. Yes, some prices may go up slightly, but it is more than outweighed by the economic benefit of this spending.

• The minimum wage now has less real buying power than it has had since 1949. In 1968, the minimum wage reached its peak in buying power of $9.12 in 2005 dollars. From 1963 to 1979, the minimum wage hovered around $8.00/hour in 2005 dollars. At $5.15 today, it has lost over 1/3rd of its buying power. If someone was the sole breadwinner for a family of four, working 40 hours a week on minimum wage, she would earn just under 51% of the poverty level. This is the lowest it has ever been since 1959, when the first poverty level was calculated.

With higher-paying jobs, Ohio will be able to attract back some of the best low-wage workers from Kentucky, Indiana, Michigan, and Pennsylvania. This will improve our quality and productivity.

Fix Healthcare Availability

Think of people you know (it might be you!) who are considering quitting their jobs and starting their own businesses. What is holding them back? In many cases, it is the fear of losing their healthcare.

How many people do you know who stay in frustrating jobs because of the benefits. You know, they say that if you stay for the job because of the benefits...you will probably need them!

If we could take concern over healthcare availability off the table, imagine how much entrepreneurial and creative energy would be released! Small businesses are the engine of job growth, and this simple act could allow us to say to other states, "Eat my Caboose!"

My healthcare plan would do this by creating a group anyone could join. It would also provide a way for current small businesses to lower their healthcare costs by pooling their risk with a much larger group of people.

Fix Education

The Ohio Supreme Court demands, and my plan provides for, a school funding plan that relies less on property taxes. If we can lower property taxes, and find other revenue streams to support our schools, businesses in Ohio should see an immediate drop in costs. This will give them additional cash to make investments or add personnel.

Of course, we also need an educated workforce to attract and keep employers. However, I believe that too much emphasis has been placed on higher education. You can't have effective universities unless you have effective high schools. The Cincinnati Enquirer recently reported on the high number of college freshman needing to take remedial courses. This is an enormous drain on higher education resources.

In turn, you can't have effective high schools unless you have effective primary school education. Focusing on higher education to the detriment of Preschool through 3rd grade education is like building the house on a weak foundation. Building learning skills and self-esteem in the early years will have enormous benefits in building a productive and happy workforce. Primary and Secondary education should be our first priority.

Many jobs do not need a Bachelor's Degree, but rather are better suited to people with vocational or technical degrees. These programs should be the second priority.

I realize that we take a calculated risk by making higher education last in the priority list. Tuitions will remain unacceptably high, and Ohio may lose its edge in some disciplines. But I believe that building for the future requires stepping back in the educational process. A solid workforce from top to bottom will be extremely attractive to future employers.

Develop an Industrial Plan

For Ohio to be most effective, it must decide what it can do well. Trying to be everything to everybody just means that we will be continually chasing the next employer that dangles the carrot of jobs in front of our noses.

The first part of an industrial plan is deciding in which industries we will focus resources. I can't say where Ohio will decide to focus, but I suggest the following:

1, Alternative Energies - These would include bio-fuels, which could take advantage of Ohio's enormous agricultural capacity. We will need to decide whether corn, sugar beets, or hemp would make the most efficient conversion to ethanol. Perhaps we focus on soybeans for bio-diesel. Given Ohio's access to Appalachian coal fields, we should also become a leader in coal gasification.

2. Pollution Control / Greenhouse Gas Control - Ohio is one of the largest producers of pollution and greenhouse gases. Eliot Spitzer, the Attorney General of New York, has already won settlements to reduce pollution levels against our worst power plants. He contends that Ohio refineries are creating New York's acid rain. Eliot Spitzer is going to be New York's next Governor - what additional pressure could he put on our state in his new position? I went to Princeton with Eliot Spitzer. I would HIGHLY recommend not being behind the 8-Ball in this effort. Ohio has a moral and an economic imperative to become a leader in these technologies.

3. Automobiles - Ohio can build on its strength in autos among foreign and domestic manufacturers. This industry has a large number of suppliers, all of whom must meet increasingly tight manufacturing and delivery standards. Providing the right personnel and infrastructure for this industry could reap rich rewards.

4. Biotechnology/Technology - The Third-Frontier Initiative is beginning to focus on these areas. This is one area in which Bob Taft and I agree. However, nearly every state has these industries as a target. We have to decide in which technology niches we want to be the strongest.

Once the target industries are chosen, we must make our state fertile ground for companies. The state should package tax incentives, research grants, and specialized education programs tailored to each target industry. By partnering with industry in curriculum development, we may be able to help fund vocational, technical, and higher education departments. In return for funding, our education institutions could guarantee a steady stream of highly-qualified applicants.

Hold Companies Accountable for Incentives Granted

Corporate citizens have to realize that they are "citizens" as well as corporations. The jobs they provide and their corporate culture become part of the community. Wrenching this presence away should not be done callously, but only in the most dire of circumstances.

If the State of Ohio or one of its political subdivisions decides to provide tax credits or other taxpayer funding to add jobs to the economy, the agreement should include the understanding that those jobs would not be shipped out of state or overseas. If the company does ship the jobs overseas, all government-provided subsidies should convert to a loan payable immediately. This returned money can be used to provide incentives to new employers or worker retraining.

Now, I realize that we will not be able to prevent all jobs from moving overseas. But for too long our government, especially at the Federal level, has made it too easy. Huffy Bicycle closed plants in Celina, Ohio and Farmington, Missouri in the late 1990's. They also closed a technical facility in Springboro, Ohio. In 1994 Missouri officials agreed to give Huffy $1.5 million in grants, $5 million in low-interest loans, and $20 million in municipal bonds for the promise of creating new jobs with the Farmington plant. In 1999 Huffy closed the Farmington plant, and the timing was impeccable?two weeks after their economic agreement with Missouri expired, according to the group Responsible Wealth. All Huffy bicycles are now made overseas. To add insult to injury, many companies in Huffy's position are lowering their U.S. tax burden by sheltering profits from overseas operations in tax havens like the Cayman Islands.

Job growth is not an easy task. It will take a multidisciplinary effort over a number of years to turn Ohio's situation around after so many years of neglect.