Nonfarm payroll employment, the broadest economic indicator, has contracted in greater Pine Bluff during the current expansion, a troubling metric. The National Bureau of Economic Research, a Cambridge, Massachusetts-based organization notes the expansion started in June 2009. Pine Bluff total employment has declined from 38,100 (June 2009) to 36,100 (March 2013, preliminary), while private jobs fell from 27,100 to 25,400, according to state Department of Workforce Services data.
The economic problem of declining employment, unfortunately, is not limited to the Pine Bluff metropolitan statistical area. Arkansas private payroll employment has expanded only 2.3 percent versus the 4.5 percent national average this expansion, according to U.S. Bureau of Labor Statistics data. Arkansas private employment growth also trailed the nation in the previous expansion (2001-07), growing 4.6 percent versus 5.5 percent for the U.S. Pine Bluff total and private employment (40,500 to 38,700, 30,200 to 27,800) also fell in the same period.
The first step toward addressing the problem of joblessness is to acknowledge its existence. A local or state economy losing jobs or creating new ones at rates less than national averages is like a four-cylinder engine firing on only two cylinders. The economic portrait that emerges from this sobering employment data suggests it’s time for a tune-up.
The status-quo Arkansas policy response has been to spend more money on public education, while state government attempts to pick economic winners and losers with programs like the Quick-Action Closing Fund. The latter ignore the counsel of Friedrich Hayek, the 1974 Nobel Economics Laureate who spent time at the Univ. of Arkansas-Fayetteville in 1950. Hayek maintained officials lack the knowledge to pick winners and losers, a process best left to marketplace agents.
A skilled work force (education) is a factor of economic development, but status-quo proponents overlook other factors such as tax rates; property rights; the rule of law; and a non-arbitrary regulatory climate. These other factors apply to large corporations and small entrepreneurs, a fact sometimes overlooked by officials.
The failure of conventional Arkansas policy has caused some policymakers to seek alternative policy solutions. This year’s decision by the first Republican-controlled state legislature since Reconstruction to advance modest capital gains and income tax cuts was an admission that rates matter. Adjacent states without this tax have higher growth rates. These states are Tennessee and Texas.
Arkansas status-quo defenders opposed broad-based tax cuts for decades, arguing they would reduce state revenues and spending. The successful phase-out of the state grocery tax, a policy recommended by our research organization in 2002 illustrates that rates can be reduced in a prudent manner. The grocery tax has been cut from 6.0 to 1.5 percent since 2007, and policymakers agreed to virtually eliminate the levy in this year’s legislative session.
Charter schools are another alternative, addressing the need for a skilled work force. Our group, in 1996, published the first Arkansas study recommending charter expansion. Analysts Allyson Tucker and Donna Watson noted, “Charter schools are increasingly championed on both sides of the political fence and few political leaders have been more vocal about their promise than President (Bill) Clinton.” Charters have expanded four times since 1996, with 8,500 students attending 35 open-enrollment and district-conversion charters in 2011.
Charters have expanded to the Delta communities of Helena and Blytheville. A Pine Bluff charter would increase parental and student choice.
School choice is closely associated with Milton Friedman, the 1976 Nobel Laureate. Friedman and his wife, Rose, noted spending on public education has increased, yet its quality has declined in many areas. Twenty-one (21) states and the District of Columbia have school choice programs serving parents and guardians who wish to enroll their children in private schools. These programs include educational savings accounts, individual tax credits and deductions, tax credit scholarships, and vouchers.
New solutions offer hope, in the long-run, that another economic cylinder or two will resume firing.
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Economist Greg Kaza is executive director of the Arkansas Policy Foundation (www.arkansaspolicyfoundation.org), a nonpartisan, nonprofit think tank founded in 1995 in Little Rock.