Asleep at the wheel – mid-race
Everyone outside of the Dome knows that Massachusetts is in a race for jobs. When you are in a race, you run the whole race. You don’t just show up for the flag waving. If you listen to Governor Patrick talk about how Fidelity did not give the state an opportunity to “compete for jobs,” I am sorry. Fidelity has been competing all along, trying to beat its competition. It’s the state that has for the longest time turned a blind eye toward financial services, one of its largest sectors, and more specifically toward one of its largest employers.
State House News [subscription required] reports that:
Back from his 10-day trade mission to Israel and Great Britain, Gov. Deval Patrick on Thursday called the trip “successful” and “demanding” and said that despite just one announcement of 50 new jobs coming to Massachusetts, he and his team had “built relationships” that will net future growth in the weeks and months to come.
Having heard now about Fidelity’s decision to move 1,100 jobs to new Hampshire and Rhode Island, SHNS notes that the
governor also reiterated his “frustration” and “disappointment”
SHNS also quoted Governor Patrick as saying, “From Fidelity’s perspective, it’s a done deal, but I want them to say that to my face.”
That’s an odd, sort of angry father response. And it follows a similar comment from Senator Mark Montigny. According to the Boston Globe, he called for a hearing on the Fidelity decision.
I believe that one or both of the Johnsons should come and defend the company, defend the policy, and how they spent taxpayer money. When a company takes advantage of a taxpayer initiative, they have the responsibility to hold up their side of the bargain.
Pioneer long ago noted that picking winners and losers is a lousy (and ineffective) idea. It’s a worse idea when you have government bureaucrats playing, from a job creation perspective, in a toddler’s size sandbox. Film industry and even biotech industry tax credits cannot help the state shimmy even a quarter of the way back up to full employment. We’ve been all over the media trying to get the public to understand the limits of this state capitalist approach (e.g., 1, 2, 3, 4).
Pioneer’s done the hard work of identifying the state’s competitive disadvantages –
• Unemployment insurance benefits that are beyond anything seen in the rest of the country (maybe with the exception of Rhode Island, but who wants to compare job creation statistics with my state of birth?)
• The cost of housing
• The cost of commercial real estate which is driven by the fact that the state has no plan for its regional cities and, as a result, the state has one central location (Greater Boston) where most everyone wants to be
The administration has been unwilling to take on unemployment insurance reform (and here too). The state spent three years of its first term playing around the edges of zoning reform to allow for higher levels of housing production. It has no real policy besides a few uncoordinated grant programs for cities outside of Boston.
In a race against New Hampshire and Boston, our report Measuring Up? (see page 29) showed that financial services companies have all the reason in the world to move to New Hampshire. Payroll costs are 15% lower, rent costs are 1/3 those in Massachusetts, electricity is cheaper, New Hampshire has no sales and use tax, and municipal property taxes are 1/3 those in Massachusetts. New Hampshire does have higher workers’ compensation and corporate taxes, but not even close to offset Massachusetts’ cost disadvantages. Comparable firms in New Hampshire are almost twice as profitable as in Massachusetts.
Then there is Rhode Island. We are losing jobs to Rhode Island. Rhodey’s cost profile for financial services companies is not good, but better than Massachusetts’. It has lower payroll costs, rents, and electricity. Even though it has higher workers’ compensation and sales and use taxes, financial services companies are 30 percent more profitable in Rhode Island than in Massachusetts.
Dear Governor and Dear Senator, if you want to compete, then compete. You can question every business decision, but you might first want to examine thyselves. Ask any business out there how hard it is to make it in this state, how hard it is to get a permit, to expand, to compete in an environment that is high-cost and proudly so. Ask them how it is to compete in an environment where fee and tax increases are batted around like whiffle balls.
If you want to compete, start listening to what they need to grow. If you want some ideas, as I noted in a Boston Globe counterpoint to the administration, here are a few:
We need a new approach to put the hundreds of thousands of unemployed Massachusetts citizens back to work. We need to stop picking winners and losers, and stop making such concentrated, publicly funded bets on specific companies and industries.
But we need to do more. We should ensure that tax incentive and credit strategies apply broadly, for all industries making research-and-development and other new investments. Second, more than government handouts, entrepreneurs and investors need a consistent and fair tax regime. Finally, the state’s calling card is our educated workforce; to compete nationally and, more importantly, internationally, we need to return to proven education policies not the latest fads.