Sunday, March 18, 2012

MA Job Creation - "Human Capital" ain't what it used to be

First, if you aren't tracking the excellent back-and-forth that Rob Eno is having at Red Mass Group (and elsewhere) with Patrick Administration Secretary of Economic Development Greg Bialecki about the validity (not) of the Administration's job-creation (not) figures, check it out. It was fascinating even before the release last week of this statistic-and-chart-filled report by Mass Inc., sub-titled "Meeting The Challenges of the Bay State's Lost Decade." Since then it's been a decidedly one-sided affair, as Rob merrily deploys the heavy ordnance of Mass Inc's data against the pop-gun of Bialecki's stale Patrick Administration rhetoric.

Give the Secretary credit. It takes a certain kind of gumption to stick with "on the mend and on the move" against stuff like this and this and this. He ought to ask his boss for a raise.

I'm not going to reproduce Rob's analysis here - follow those links and read it for yourself. The upshot, though, is that in the past week new figures from the Board of Labor Statistics and now the Mass Inc. report have completely and thoroughly debunked Deval Patrick's frequent claim that Massachusetts is a national leader in job creation. The truth is that for most of the past decade, we've been in the middle or the back of the pack. The fact that those conclusions jibe so thoroughly to what on-the-ground personal experience has been telling us for years only makes the credibility impact worse for whoever ends up carrying the Patrick legacy standard into 2014.

The Administration's best and most effective rejoinder to such an observation, of course, is to accuse its critics of "rooting for failure," or "playing to our fears instead of our hopes," etc. But it isn't fear-mongering to ask our elected officials to stop spinning fictions against the very serious and readily-observable reality reflected in Mass Inc.'s meticulously-researched conclusions. Eventually one must ask such officials, respectfully, to cut the sanctimony and rejoin us in the real world.

***(Economic Analysis By the Patrick Administration)

Anyhow, one particular part of Mass Inc.'s conclusions caught my eye in particular (you read the report, right? It's only 207 pages!). 

A couple of weeks ago, the Beacon Hill Institute released it's own annual "competitiveness index," which ranked Massachusetts number one - numero uno! - in the nation. Among the infinitesimally-small community of folks who watch this stuff closely this was no big surprise. The BHI index is notorious for placing a heavy thumb on the scale for the Bay State's so-called "human capital," as indeed was made clear in BHI's own press release:
"During the past decade, Massachusetts has solidified its standing as a competitive state." said Jonathan Haughton, Professor of Economics at Suffolk University and one of the principal authors of the report. "One cannot over-emphasize the importance of a highly skilled workforce that can deploy technology and export value-added goods and services. The index does a good job of balancing cost factors such long commuting times and high electricity prices against resource strengths such as education and technology."
With apologies for the lengthy self-quotation, here is the comment I registered under Red Mass Group's post about the BHI report:
First, let me say that it's great that Massachusetts has such wonderful "human capital," and it is equally great that our access to "human capital" affords us so important and valuable an advantage in the national and global marketplace. We have real strengths - and in any list of those strengths for the past three decades plus you'll see this same recitation: "human resources, technology, business incubation..." institutions of higher education, teaching hospitals, etc. All of these are real and valid and valuable.
And it is not surprising that in a competitiveness survey that generously weighs those factors, Massachusetts comes up aces. Wonderful. We should be proud to live here.
Of course none of those things - none - have a thing to do with state government. That won't stop the Governor & Co from happily taking a measure of credit, but it's a fairly obvious fact.
"Human Capital" -  shouldering the load
... Professor Haughton says, "One cannot over-emphasize the importance of a highly skilled workforce that can deploy technology and export value-added goods and services." But of course one CAN over-emphasize that importance. The Governor routinely does, counting on our "human capital" to out weigh the myriad decisions he and his legislative allies have made that drive up the ever-increasing cost of doing business in Massachusetts. Businesses will come for our human capital, goes the thinking. But human capital - valuable as it is - is but one consideration of many, placed on the scale and weight against others. Professor Haughton concedes the point in his very next sentence: "The index does a good job of balancing cost factors such long commuting times and high electricity prices against resource strengths such as education and technology." It IS a "balance." And we cannot go on making it ever more expensive to locate and grow here, and expect our wonderful "human capital" forever to outweigh those other factors.
Now here's that excerpt I mentioned from the Mass Inc. report (page 195):
A shift-share analysis of payroll employment changes in Massachusetts revealed that the state had negative national share effects in several of its leading industries. The reduced national share of jobs in these industries exacerbated the state’s job losses over the decade. Despite having the best-educated workforce in the nation, as measured by the share of its workers with a college degree in 2000, Massachusetts lost competitive advantage in some key industry sectors such as health care, professional, scientific, and technical industries, and finance and insurance. The Commonwealth’s performance was not an anomaly. In fact, the best-educated states across the nation were overwhelmingly mediocre performers in job creation and were more likely to rank near the bottom among the 50 states on payroll job growth than to rank near the top. These findings indicate that having a highly educated workforce alone is not sufficient for generating strong job growth. New public and private policies must be sought to boost the competitive advantage of Massachusetts industries and their job generating capacities. 
In other words, that "balancing" that BHI hopes for, and that the Patrick Administration routinely counts on to justify its anti-growth policies, is no longer happening.  Our "human capital" - and that of states with similarly-educated demographics - is no longer sufficient to compensate for our high cost of living, our high energy costs, our heavy tax burden, and our stifling regulatory regime.

In the past employers of the past might have looked at all of those things (which, by the way, weren't nearly so bad back in the day) and say, 'well, Massachusetts has all of those highly-skilled workers; having them will give us the edge to compensate for all of that other stuff.' Now, as Mass Inc. makes abundantly clear, those same employers say, 'Hey Massachusetts grads, why don't  you pack up your stuff and come join us in Tennessee?'

The sooner we elect ourselves some leader who understand that we cannot keep spending against "human capital" that has lost so much of its value, the sooner we'll reverse the middle class decline and economic stagnation that Mass Inc.'s valuable report illustrate so starkly.

1 comment:

  1. It's a lot less expensive to relocate the human capital to where the jobs are than to relocate the jobs to where the human capital is... especially when every other factor other than human capital works against business. That's why Massachusetts and the rest of the northeast corridor is losing population.


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