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Paid Leave and Rhode Island’s Employment Freeze

A couple of weeks ago, the Wall Street Journal published a letter by a Rhode Islander who stated that “seven of 10 members of my small-business study group are moving their businesses to Massachusetts as a result of a seriously flawed paid-leave bill the governor signed last year.”  Over the weekend, somebody from out of state asked me about the policy, which the Dept. of Labor an Training explains in a fact sheet on its Web site.

Thinking about the matter, the most recent jobs and employment report came to mind, wherein a painful downward revision of past numbers joined with foreboding downward trends for January.  That trend continued in February, and we’ll give further detail on that shortly.

The key point for the moment is that Rhode Island’s economy didn’t do as well as analysts had thought during the latter half of 2018, and we’re now bucking national trends and backsliding.  What if the paid-sick-leave bill is as damaging across the state as the letter writer described in that one small-business group?

The following chart shows the changes in employment and RI-based jobs through 2018 and up to February’s release.

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This cursory presentation is insufficient to prove that progressive policies like mandated paid sick leave have an immediate and detrimental effect on Rhode Islanders’ ability to find work.  The chart is striking enough, though, that we ought to at least pause before layering on more such policies — enacted by people who do not understand economics and who impose their whims on Rhode Islanders without even basic consideration of what their emotion-driven governance might do to people when the fantasy becomes reality.

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Governor Seeks to Punish Employers Via Proposed Medicaid Tax

Businesses should be applauded for hiring those most in need of work…not punished with more taxes, and certainly not made out to be the bad guy. It is misguided to think that if employees are not covered by their employer’s insurance plan, full or part time, and instead are enrolled in Medicaid, then the business should be punished.

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Overcoming the Green Religion

The Center of the American Experiment has done a comprehensive study finding that a 50% renewable goal is simply not a feasible goal for Minnesota, and the center’s president, John Hinderaker, summarizes some of the findings on PowerLine.  Basically, the technology isn’t there, and the costs aren’t reasonable, considering that:

Greenies will tell us, of course, that $80.2 billion, a declining economy and tens of thousands of jobs lost are a small price to pay to save the planet. But in fact, the reduction in CO2 emissions would be infinitesimal. Using the Obama administration’s highly questionable assumptions, achieving the 50% renewable target would reduce the Earth’s average temperature by 0.0006 degree Centigrade by 2100–an amount that is far too small to detect with even the most sophisticated equipment.

Liberals don’t actually believe that global warming caused by human CO2 emissions is an “existential threat” to mankind, as they like to say. If they really believed it, they would be campaigning to invade China and India, or to bomb their hundreds (if not thousands) of coal-fired power plants from the air. But I think that we can all agree that reducing global temperatures by 0.0006 of one degree isn’t saving anything.

Of course, if climate change really were the target of these policies — rather than less existential considerations like virtue signalling, socialism, and crony capitalism — advocates would be advocating to get the West over its fear of nuclear power.  (Although, we should make some allowance, on this count, because even if it would solve the problem, cult-like environmentalists tend to see nuclear technology as a Dark Power in opposition to the Light Power of wind and sun and trees and furry animals.)

Be that as it may, readers would do well to read through Hinderaker’s list of findings, if only for the reminder that these adventures in green virtue really do have harmful effects on economies and families.

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The 6.5% Sales Tax Promise: Money In Your Pocket

Existing state law (General Law 44-18-18) specifies a “trigger” for a sales tax rate reduction to 6.5% (from its current level of 7.0%!) if certain internet sales tax collection criteria are met. The rationale for this law was to relieve Rhode Islanders of the additional burden of imposing a sales tax on a broader range of purchased goods, by easing the tax.

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A National Tide of Small Business Job Creation and RI’s Low Entrepreneurship

Well, this looks like good news:

Job creation among small businesses broke the 45-year record in February with a net addition of 0.52 workers per firm, according to NFIB’s monthly jobs report, released today. The previous record was in May 1998 at 0.51 workers per firm. The percent of owners citing labor costs as their most important problem also hit an all-time high, with 10 percent of owners reporting labor costs as their biggest problem. …

“With the government shutdown behind us, the labor markets will get back to normal,” said NFIB Chief Economist Bill Dunkelberg. “However, it appears that the shortage of workers will continue to restrain Main Street growth. If businesses were fully staffed, more could be produced and sold. Owners are reporting increasing employment at their firms at the highest rates in survey history, now they just need workers to fill them.”

Unfortunately, the NFIB’s data doesn’t expand into state-level detail, but one suspects Rhode Island isn’t doing quite so well.  This suspicion isn’t only because Rhode Island is doing so poorly in the employment and jobs market generally.

Available information has long laid bare Rhode Island’s difficulty with small businesses.  One indicator is that the Ocean State tends to have much lower rates of entrepreneurial activity than one would expect in an economy that is worse off than the average.  Similarly, evidence suggests that Rhode Islanders who start new establishments have difficulty keeping them going.

Newer data from the Kauffman Foundation reinforce my speculation in those other links.  Overall, Rhode Island has the worst entrepreneurial activity in the country — and it isn’t even close.  Notably, given my earlier theorizing, the Ocean State is also worst in the nation when it comes to entrepreneurs who start businesses because they have to do so in order to work, versus those who do so because they see opportunity.

Our bad economy forces Rhode Islanders to make their own work.  Then, when self-starters begin having to really follow the government’s rules because they’re expanding and hiring, the state causes them to flounder.  We can reasonably speculate, therefore, that the tides of record small-business job creation are thinner in the Ocean State.

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When Will State Government Stop Hoping?

A letter to the editor from Rhode Islander Kris Gregory appearing this week in the Wall Street Journal is another item of which state officials should take note, but probably won’t (emphasis added):

Bad legislation, as much as stealth taxes, also contributes to the state’s deteriorating business climate. Seven of 10 members of my small-business study group are moving their businesses to Massachusetts as a result of a seriously flawed paid-leave bill the governor signed last year over the opposition of the business community. Even former Rhode Island governor and 2016 presidential candidate Lincoln Chafee appears to be relocating to tax-friendly Wyoming. With the coming 2020 census, Rhode Island cannot afford the departures. The state is perilously close to losing the second of its two congressional seats, and with its relative population decline, getting less federal funding which supports more than a third of the state’s nearly $10 billion budget.

Rhode Island keeps squeezing its productive citizens because they are less concentrated than special interests.  But the thing about a group that tends to make decisions as individuals is that a critical mass will have decided to take an action that could be catastrophic before politicians are slapped with the reality.

In a sane state, the most recent jobs and employment report would be just such a slap.  Unfortunately, this is Rhode Island, where government officials seem to interpret the state’s motto, “Hope,” as a strategy.

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A Top-Down Minimum Wage Is Reducing Hours at Whole Foods

It looks like employees of Whole Foods are learning a straightforward lesson:

In response to public pressure and increasing scrutiny over the pay of its warehouse workers, Amazon enacted a $15 minimum wage for all its employees on 1 November, including workers at grocery chain Whole Foods, which it purchased in 2017.

All Whole Foods employees paid less than $15 an hour saw their wages increase to at least that, while all other team members received a $1 an hour wage increase and team leaders received a $2 an hour increase.

But since the wage increase, Whole Food employees have told the Guardian that they have experienced widespread cuts that have reduced schedule shifts across many stores, often negating wage gains for employees.

The lesson is this:  Money has to come from somewhere, and to believe it will inevitably come from the most powerful is delusional.  Wages and business models are settled within a marketplace, and forcing one part of that marketplace to be more costly doesn’t increase its value to the company.

A more social-justicy way to approach the same principle is to note that the problems that create inequity are structural.  You can’t just dictate a change in the symptom to cure the disease.  Progressives prefer a treatment involving consolidation of power in government, which can then be used to “level the playing field,” but this is subject to the same problem:  The powerful begin with an edge.

The only structural change that will achieve fairness and more-equitable outcomes is to expand our freedom so nobody is free of competitive pressures.

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Rhode Island Needs A Freedom Agenda. (And It’s Coming This Week.)

The Ocean State is doomed to lose a US Congressional seat because of its hostile tax, educational, and business environment. The state’s current thinking chases away the wealth, families, and businesses that are needed for all of us to be truly prosperous. The far-left big government policies that have reigned in our state for far too long will continue to only make matters far worse. Instead, we need a change of direction.

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Being Socialist Just Like Sweden

As another generation is misled into believing that socialism would be worth a try in the United States, one often hears how well the economic system works in Sweden and other Scandinavian countries.  But as John Stossel notes Sweden is not socialist.

With a prioritization of free markets, school choice, a less-progressive tax system, and privatized social safety nets, it’s arguably less socialist than the United States.  In fact, when the country tried something closer to actual socialism a few decades ago, it was disastrous.  Unfortunately, like the many examples of socialism’s failure, the memory of true believers tends to fixate on the dream of what they hoped would be, rather than the reality.

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Everything We Thought About 2018 Employment Was Wrong

Every year, the federal Bureau of Labor Statistics (BLS) revises its numbers for states’ employment statistics.  Those results will be released tomorrow, but Rhode Island’s Department of Labor and Training (DLT) typically releases a limited press release the day before.  As of this writing, the DLT’s Web site does not include the press release that went out to journalists and other interested subscribers.

In a word, the results are not good.  The BLS revised data back to 2014, and the DLT only released round numbers back to December 2017, but in the name of informing people at Internet speed, here’s a preliminary chart comparing the revision to the originally reported numbers.

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Some things to note:

  • 5,300 employed Rhode Islanders disappeared.
  • The workforce dropped by 4,800.
  • That notched unemployment to 4%.
  • The better part of all the gains we’d thought we’d made during 2018 evaporated.

For political context, I’ve marked the month that Democrat Governor Gina Raimondo’s first budget went into effect.  Throughout most of 2018, the reported numbers were sufficiently good to open up the possibility that the governor’s policies simply had a lag in their effectiveness.  Now, that seems to be less plausible.

From the time she took office, employment in the state has grown at a slower pace than it had been previously — by half.  From December 2014 through December 2018, Rhode Island employment increased 0.77% per year.  From the time the state hit bottom, around December 2011, through December 2014, the growth rate was 1.42% per year.

Perhaps relying on incorrect numbers, Rhode Islanders didn’t change direction with the last election.  One test for the governor — and a sign of her intentions — will be whether she makes some adjustments or doubles down on her top-down, progressive, crony-capitalist approach.

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Chris Maxwell: National Academic Board Finds No Data to Support Raimondo & RIDOT’s Claims of Truck Damage to Highways & Bridges

The National Academy of Sciences’ Transportation Research Board (TRB) recently met to assess whether changes to truck size and weight (TS & W) should be implemented. The nation’s scholars, engineers and infrastructure “wonks” came away from the conference with a consensual determination that there was not enough data to support changes and that further studies were needed before any revisions were made to either decrease or increase the allowable dimensions and weight on America’s highways and bridges. In fact, the group spent significant time developing a plan for future research on the TS & Weight issue because there are information gaps and inconsistencies in studies.

So why are DOT leaders around the country yelling “fire in the theater” as they pin the trucking industry with the ills of our infrastructure?

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Loss of US Congressional Seat Underscores Need for Reform Agenda

The state of the State of Rhode Island is not good. Even as the rising national economic tide has lifted ships in all states, when compared with the rest of the nation, our Ocean State is severely lagging, and is in danger of sinking further behind if progressive policies continue to be implemented.

Perhaps no indicator more appropriately demonstrates the failure of the leftist status quo, than does the near-certainty that Rhode Island will lose one of its precious House seats in the U.S. Congress. The persistent jokes of family and friends “moving out of state” have now tragically manifested themselves into the harsh reality that our state is not competitive enough to see population growth on par with the rest of the country.

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Unnecessary “Fair Housing” Bill is Unfair to Landlords!

House bill 5137, deceptively named the Fair Housing Practices bill, which mirrors leftist-inspired legislation introduced in other states, is completely unfair to landlords.

The legislation claims it seeks to end discriminatory housing practices because in the progressives’ land of social-equity, making a legitimate business decision should be a crime. Under the proposed law, any Section-8 lessee applicant (those whose rents are subsidized by the federal government) who are not accepted as a tenant, must have been discriminated against, and the landlord must be punished.

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The Irrational and Rational in Real Estate and Climate Change

If this is correct, it would seem that — whatever they may tell politicians and pollsters — many Rhode Islanders don’t actually believe in global warming when it comes to putting their own skin in the game:

“The price of any asset, be it commodities, gold, stocks, depends fundamentally on people’s beliefs,” said Lint Barrage, assistant professor of economics and environmental studies at Brown University. “If people are excessively optimistic about the future value of an asset, there is potential for mispricing, and bubbles and overinvestment.”

Speaking Friday at a one-day conference at Brown on the political and economic consequences of climate change, Barrage described her research on the coastal property market, which included going door-to-door in Rhode Island and interviewing homeowners about flood risk. People with homes in federally designated flood zones tended to underestimate the risk of flooding when compared with people who lived further inland, she found.

“The reason all this matters is that markets cannot price risks efficiently if people don’t believe in them,” she said.

And if the risks of climate change aren’t being accurately factored into prices now, then it could mean a steep drop in values somewhere down the line.

Of course, people’s beliefs and the decisions they make based on them are complicated.  If a waterfront property is highly desirable and brings prestige right now, people may tend to discount the risk of owning it in the long term even if they fully believe that climate alarmists are not actually alarmists.

But then, on the other side of the ledger, one has to consider that — consciously or not — people assess risk to some extent on what they observe, rather than what they are told to expect.  Thus, they may pick up on the fact that warnings about sea-level increases tend not to match our experience.  They may also pick up on the fact that, when the alarmists try to present scary scenarios, they have to go way back in the past or project way out into the future.

In short, one can’t rule out the possibility that people are right to place these bets as they do.

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More Regulations During a Housing Shortage Is a Bad Idea

One always has to wonder something after reading an article like the one Madeleine List wrote about legislation to force landlords to take government housing vouchers and to block their ability to find out if potential tenants have appeared in housing court before.  Was the reporter absolutely unable to find anybody to offer a contrary view?

The first argument one hears as an opposing view is that tenants who aren’t paying their own rent might not feel as inclined to keep it up or stay on good terms with their landlords.  Although this might be a reasonable concern, in some cases, it may be more of a strawman, because it isn’t the best of the three most-obvious answers.

The most practical of the other two answers is that Section 8 isn’t simply a source of income.  Accepting Section 8 vouchers requires the landlord to accept regular government inspections and other impositions.  Even if we take as a given that the government will never make inspections more burdensome than the most basic health and safety concerns that all landlords should cover voluntarily, many may simply not want to deal with that extra layer of bureaucracy.

The third obvious answer is that accepting low-income tenants comes with some risk, whether the risk is that they won’t treat the property well, that they’re on the bordeline of being able to afford the rent at all, or that the government might decide that its vouchers give it more authority over your property than was initially the case.  And risk comes with a cost.

This gets to a point about unintended consequences that legislators really should keep in mind at all times.  Imposing risk effectively raises the cost of being a landlord, either by imposing an cost in stress or by forcing them to raise rates or lower profits in order to compensate when the risk goes bad.

Raise the cost of rentals, and we’ll have fewer.  Have fewer rentals, and the natural price of the market will go up.  Raise that price, and we’ll have fewer rentals.  Rinse.  Repeat.  Housing crisis.

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Rhode Island’s Job Growth Gap; U.S. Growth Rate 50% Higher

Regional and national coverage of Rhode Island’s Democrat Governor Gina Raimondo has continued to promote her talking points about employment growth.  The Ocean State Current has already put up the warning flag about an apparent downturn in employment, but what about jobs based in the state?

As the following chart shows, going by job counts each December, the gap between Rhode Island’s rate of growth and that of the United States is substantial.  If the Ocean State had tracked with the country, our state would have 23,429 jobs (just under 5% more).

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Since the low point in 2009, the U.S. rate has been 45% faster than Rhode Island’s.  Since Governor Raimondo took office, that job-growth-rate gap has increased to 52%.

Most of that increase comes from the flat year Rhode Island experienced under Raimondo’s first budget.  Meanwhile, policies at the national level corresponded with an inflection point in the national line, with job growth increasing more in 2018 than in 2017.  In the Ocean State, by contrast, job growth slowed.

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Yet More Bad Toll Numbers from Raimondo & RIDOT

Surprise surprise surprise! WPRI’s Ted Nesi reports that

Gov. Gina Raimondo has sharply lowered her forecast of how much money truck tolls will generate this year because they are getting and running more slowly than initially expected.

The budget proposal Raimondo released earlier this month projects that tolls will generate $7 million in the current 2018-19 budget year, which is $34 million less than was expected when the budget passed last June.

If you’ve watched the toll discussion and rollout even casually, you will know that this development is actually not at all a surprise.

By capitulating to progressive-union pressure, and despite disingenuous claims that no broad-based taxes were imposed, Ocean Staters will once again bear increased burdens to pay for new taxes and regulations, more spending, and more union giveaways. Lawmakers chose to appease, rather than resist, the progressives’ job-killing, big-spending agenda.

An Employer’s View of the Governor’s Regressive Budget

Sometimes, a perspective directly from the front lines says it better than we can ever do. Below is a response from one of our Center’s email subscribers, who is a large employer in our state, commenting about my recent “Raimondo’s Rhode to Serfdom” oped in the Providence Journal and about a related email from this past weekend.

The frustration that this government does not seem to understand, or care about, the increasingly onerous plight that it continually and unilaterally imposes on job producers comes through very strongly, as does the critique of how leftist polices have negatively impacted the work ethic of young adults.

From an actual employer in RI:

I am so disappointed that [the governor] is definitely [living] on another planet. She should be in a business and [try to] find employees. Free education and early pre-K does absolutely nothing when we are graduating high school seniors that can barely read. I need employees that can be trained in a blue collar industry, but the current generation doesn’t want to work. They have no communication skills since they are glued to phones. Most can’t pass drug testing, and she wants to legalize pot. We have spent millions on smoking cessation, and now we want to legalize drug that most users smoke. Pot is an entry level to drug abuse but she wants to spend millions on opioid addiction.

She claims she isn’t raising taxes, but her budget shows increases in taxes on almost everything the average working person uses. No cuts in her overpaid staff or in the excessive number of State Workers. Online gambling is another bad idea; gambling is an addiction, and we all know people that have lost everything because of gambling. My question is why the citizens never get to vote on anything?

Mattiello stated the defeat of Pawtucket Red Sox was the will of the people; how would he know if the people never had a say or a vote? Our [Congressional] Rep made a special trip to the border to investigate the death of an illegal child but didn’t make any comment about the death of a Rhode Island child who died in DCYF care.

Help wanted adds everywhere, but we have a generation that doesn’t want to work because they have gotten everything for free and have absolutely no work ethic.

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Another Lesson to Learn, Rhode Island: Minimum Wage

Sometimes state government makes bad policy decisions because it is improvising without any example to follow for its actions, and sometimes state government makes bad policy decisions because it ignores the evidence that other states have generated.  Passing progressive Democrat Gina Raimondo’s proposed new Medicaid tax on employers and her proposed minimum wage increase would be in the second category.

Writing for the Foundation for Economic Education, Jon Miltimore notes one New York City restauranteur who is cutting hours, cutting staff, and increasing prices, all to address a massive increase in the city’s minimum wage:

Bloostein is just one restaurant owner, you might say. But he is not alone. A New York City Hospitality Alliance survey shows that 75 percent of restaurants said they planned to cut employees hours in response to the wage hike. Nearly half (47 percent) said they’d cut jobs.

The outcome is hardly a surprise. These are the signature responses to steep wage hikes forced onto businesses (those that manage to bear the costs and stay open, anyway).

However pure the intentions of New York politicians might be, the minimum wage will have a dire impact on those who can least afford it: young, poor workers who will not be afforded important job experience. It’s a terrible way to fight poverty …

Of course, as Miltimore goes on to suggest, New York politicians’ intentions cannot be assumed to be pure.  Their incentives are different from the people’s needs, and that most definitely applies to Governor Raimondo.

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Governor’s Regressive Budget – The Wrong Direction?

Is the Governor’s budget pointing our state in the right direction? On Monday, I attended the Martin Luther King Jr. Day breakfast hosted by the RI Ministers’ Alliance. At the breakfast, the Governor said that the country is moving backward, and that she is committed to moving RI ‘forward’ and in the opposite direction. What planet is the Governor living on?

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Governor’s Budget: The “Rhode To Serfdom”

Instead of seeking to shape Rhode Island’s future with the proven ideals of a free-society, Governor Raimondo’s proposed 2019-2020 budget is a stunning departure from America’s core values and, instead, would put our state on a “Rhode to Serfdom.”

The Governor’s regressive budget points us 180 degrees in the opposite direction of where we need to head, and would stifle any opportunity for growth.

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