Each year, several organizations roll out “scorecards” measuring what they think are the important indicators determining whether state taxes are too high or too low, the health of state economies, or how “business friendly” each state is.
For those living and working in the Ocean State, these indicators matter, but far less so than the overall quality of life, including the quality of the schools, the accessibility of high-quality health care and child care, safe and vibrant communities, and public amenities such as parks and libraries.
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Learn MoreToo often, such considerations are little more than footnotes that too often conflate rankings on a business-focused ranking with how well the state is doing overall. (For instance, CNBC’s recent ranking of “America’s Top States for Business” allots just 13 percent of total available points for its quality-of-life measure, which includes factors “such as the crime rate; inclusiveness, such as antidiscrimination protections; the quality of health care; the level of health insurance coverage and the overall health of the population … local attractions, parks and recreation [and] environmental quality.”)
For Rhode Island decision-makers, the constant drumbeat of skewed rankings is an unhelpful distraction from the things that matter to the broader public, and ironically, feed into a negative spiral that turns those rankings into self-fulfilling prophecies. Does anybody think that the constant hand-wringing over dismal rankings will make businesses want to flock to Rhode Island? “Come to the Ocean State. Please ignore our string of rankings in the bottom five nationwide.”
The “Jobs and Opportunity Index” utilized by the Rhode Island Center for Freedom and Prosperity illustrates one of the other very common shortcomings of such indices – a reliance on mathematical calculations that combine indicators in ways that are, at best, difficult to justify. Their index has three factors: a job-outlook factor, a freedom factor and a prosperity factor.
Their freedom factor combines two employment measures in the numerator, and three public-assistance measures in the denominator. The notion that “freedom” is enhanced by denying SNAP benefits to hungry children or by restricting access to medical care through Medicaid doesn’t ring true. Nor does it make sense that a state that increased its income by half (let’s say from $5 trillion to $7.5 trillion, but doubled its combined state, local and federal taxes from $2 trillion to $4 trillion would see its “prosperity” factor decline from 2.5 to 1.875. Only those singularly focused on reducing taxes would prefer the former situation, when in the latter situation, state residents have both $500 billion more in their pockets, and $2 trillion more to invest in small-class sizes, cutting-edge infrastructure, quicker response times from public-safety officials and a healthier workforce. And using their “faux prosperity” measure to multiply the other two factors only serves to compound their distorted outcomes.
For Rhode Island’s working women and men, there are other important measures of how we’re faring as a state, some of which point to public-policy responses that could pay huge dividends for Rhode Island families while catalyzing considerable economic growth. Two key measures are wages and income. Rhode Island’s median wage in 2015 stood at $17.22 (19th highest among all states), while median income for 2014 was $53,636, placing Rhode Island 17th among all states.
While these numbers suggest Rhode Island isn’t faring as poorly as we’re led to believe by many, they both leave lots of room for improvement, and more importantly, mask significant disparities based on race and ethnicity. Median Latino wages in 2015 were just $12.59, two-thirds of the white median of $18.81. Similar disparities in educational attainment highlight the importance of ensuring all Rhode Islanders have access to supports necessary to complete high school and higher education opportunities that prepare them for today’s economy. Other policies that help to grow Rhode Island’s middle class include increasing the minimum wage (stuck at $9.60/hour after the General Assembly missed an opportunity to increase it this year), and further expanding the Rhode Island earned income tax credit, a common-sense tax break for working families, and ensuring policies that help workers engage fully in the economy, paid earned sick time and access to affordable, quality child care.
Increasing personal income – whether via the EITC or by raising wages through a combination of higher minimum wages and increases resulting from education and training, provide what Rhode Island economist Leonard Lardaro called, “the lubricant for economic growth.”
Policies that enhance personal income support economic growth. Rhode Island workers with disposable income in their pockets are the real “job creators,” supporting local business through demand for goods and services. You won’t see that fact reinforced by many state rankings, but it doesn’t make it less true. •
Douglas J. Hall is director of economic and fiscal policy for the Economic Progress Institute in Providence.
THANK YOU!! What a breath of fresh air to see this in the paper.