I was recently contacted by the representative of a consortium of leading industry associations in Massachusetts who asked me to identify the policy changes that, in my professional opinion, would have the greatest impact on increasing job growth in Massachusetts. What follows is a slightly edited version of my response.
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Your question is an absolutely critical one. Despite what is unquestionably a robust economic recovery for the Commonwealth (MassBenchmarks Current Economic Index, March, 2011):
· Nearly one in three households are concerned that they or a member of their immediate household may lose a job in the near future (UMass Dartmouth Public Policy Poll).
· The official unemployment rate for workers in the Construction Industry remains over 18 percent (Profile of Claimants, April 2011).
Much has been written recently about the imbalanced nature of the current recovery, ongoing challenges in blue-collar labor markets, and the struggles of many of the state’s urban communities and regions outside of the immediate Greater Boston area. In my professional opinion, directly addressing the underlying issues responsible for these imbalances is the most reliable way to improve the Commonwealth’s employment growth.
Some First Principles
When considering policies to increase the number of jobs created in Massachusetts, the state’s policymakers and business leaders should begin by recognizing that:
1) Fundamentally, the competitive advantage of the Massachusetts economy is rooted in the high skill level and “yankee ingenuity” of its labor force, the deep strength of its world-class health care and institutions of higher education, and its extraordinary scientific research and development capacity.
2) State, regional and local education, economic development and workforce development efforts will have the greatest positive impact by:
a) Improving the ability of communities across the state to produce, attract, and retain skilled workers by working to make all our communities safer, more affordable, and higher quality places to live, work and do business.
b) Extending the benefits of the Massachusetts Innovation Economy to regions outside of Greater Boston.
c) Reforming current laws and policies that have the effect of making Massachusetts a more expensive place to live and a more costly place to do business.
Toward this end, I think the Patrick-Murray Administration’s Regional Economic Development Framework represents a thoughtful and principled agenda that is well worth the support of the Commonwealth’s business and legislative leadership.
In other words, Massachusetts does not need a new strategy. It needs to directly address several major competitive challenges that serve as impediments to economic and employment growth. Successfully meeting these challenges would have the dual benefit of spurring job growth and improving the quality of life for Bay State residents.
Competitive Challenge 1- An inadequate supply of housing
Our archaic zoning regulations and local resistance to new housing development remain major challenges. The current fiscal crisis presents our elected leaders with an opportunity to begin to use state and local aid to cities and town as an incentive to encourage a more progressive attitude towards intelligently planned, well-designed, and much needed housing developments.
While the housing market in Massachusetts remains moribund, the Commonwealth still has thousands fewer housing units than are required for a healthy market given expected job and population growth. This structural shortfall serves to keep housing less affordable and makes it more difficult to attract and retain the next generation of workers and their families. If the Bay State is able to add jobs more rapidly than is expected, this shortfall will only grow larger absent key policy reforms.
Making it easier to develop more housing would have short-term economic advantages as well. Recent studies have documented the substantial impact that home construction has on the local and regional economy. Significantly, the industries and workers that would most directly benefit from more residential development are those that were hardest hit during the recession and have yet to experience many of the benefits of the economic recovery to date.
In much the same way that they recently proposed changes to health care benefits for municipal workers despite union resistance, I think state leaders must act in spite of municipal resistance to modernizing zoning and land-use policies. Particularly in this challenging fiscal environment, incentives do matter and an approach that rewarded saner and more predictable land-use policies by directly connecting local aid distribution to their adoption could be a significant “carrot” for many cities and towns.
Ideally, reform would focus on the state laws that govern zoning and land-use regulations and provide clear incentives for communities to participate in programs that promote responsible and sustainable commercial, industrial, and residential growth patterns including expedited permitting programs. Mandatory training for local officials that have oversight of land-use would also encourage a more informed and professional approach to development decision-making at the local level.
Until there is a cost for not modernizing local land-use policies and practices, there will be no substantial improvement in our housing situation and a motivated minority will continue to make it difficult for working families to live in many of our cities and towns.
Bottom line, modernizing the way in which we manage the use of our land in a manner that fairly balances the needs of our families, growing employers, and legitimate local concerns about growth would have multiple payoffs. It would serve to improve the long-term competitiveness of the state and create desperately needed jobs in our embattled construction industry.
Competitive Challenge 2- An outdated local aid funding formula
A recent policy brief by the Federal Reserve Bank of Boston’s New England Public Policy Center highlights the need for reform in the formula that the Commonwealth uses to allocate local aid to cities and towns. The reform proposed by Fed researchers would not redistribute current aid but instead proposes changing the funding formula to ensure that going forward, any new growth in local aid would be distributed based on need (defined as the gap between a community’s cost of providing necessary services and its ability to raise revenue to pay for these expenses).
Bottom line, reform of the way the state shares resources with cities and towns should, a) hold communities harmless in the current allocation of aid, b) redirect new growth in state-aid to those communities that need it most, and c) provide incentives for communities to adopt policies that encouraged intelligent development and job creation would both encourage short-term job growth and help to “prime the pump” for longer-term job growth.
Competitive Challenge 3- The Education Gap
The single most reliable and sustainable way that Massachusetts can extend more economic opportunities to its communities and residents is by providing access to high-quality public educational opportunities at both the K-12 and post-secondary level. Access to quality and affordable educational opportunities helps to ensure that the state’s employers are able to recruit and retain the skilled workers they need to thrive in Massachusetts.
While Massachusetts is a national leader in both K-12 and Higher Education, significant achievement gaps remain, particularly in those public schools that serve low-income students and their families. At the post-secondary level, the failure of Massachusetts to adequately support its public higher educational institutions has resulted in rising fees and strong incentives to focus efforts on more lucrative out-of-state students. Left unchecked, these developments present a direct threat to one of the State’s strongest competitive advantages: its highly educated workforce.
While there are no obvious quick fixes to the challenges facing our under-performing K-12 schools and districts, the ability of our communities, particularly our cities, to become economically vital places to live, work, and do business will be greatly hindered until we are able to overcome one of the biggest obstacles to their social and economic development.
The perception and, in many cases, the reality of poorly performing schools makes it very difficult for our “Gateway Cities” to attract and retain working and middle-class families. It also puts further pressure on those communities and housing markets that are home to quality public schools. This exacerbates housing affordability problems and economic development challenges for communities that both favor and have the necessary infrastructure to support new industrial and residential development. Additionally, a renewed commitment to the Commonwealth’s support of public higher education is long overdue. During these very challenging fiscal times, policymakers must set priorities.
Bottom line, sustainable investment in high quality public education is one very predictable way to ensure that Massachusetts will continue to produce the next generation of entrepreneurs and the human capital required to allow them to grow and thrive in communities across the Commonwealth. These are the people who will create the vast majority of jobs in Massachusetts if they are given the opportunity to do so.
Concluding Thoughts
You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.
The Commonwealth’s business leaders, elected officials, and policymakers are facing a highly uncertain economic environment and, while the challenges they face are profound, current conditions present them with a rare opportunity to make long-needed changes in the ways in which Massachusetts regulates its land, provides financial support to its communities, and supports public education. I sincerely hope that this opportunity is not wasted.
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