Commentary

Minnesota should focus on protecting jobs

by Ann Markusen

Finding work for the swollen ranks of our unemployed. Helping companies avoid more layoffs. These are the goals of Minnesota's new House Jobs Task Force that convened last month.

Its more than 30 members pressed an array of the state's top economists on what works and what can be done. On the whole, from state Economist Tom Stinson to the Federal Reserve's Art Rolnick, the responses were discouraging. Minnesota is simply swept up in a national business cycle, and there isn't much that can be done in the short run.

But a close reading of other states' responses to dramatic job loss suggests that Legislative action can make a difference.

When textile and shoe jobs hemorrhaged in New England in the 1950s, Massachusetts and Connecticut channeled surplus engineers, workers and plants into precision machining, aircraft engine and communications technology activities. In the trade and overvalued-dollar meltdown of the 1980s that was particularly hard on steel and heavy machining sectors, states like Michigan, Illinois and Wisconsin actively shepherded resources into the stronger portions of those industries. In contrast, Ohio, Pennsylvania and California failed to help their challenged sectors.

In the 1990s, when the country sustained a loss of 2 million jobs in the defense industry, states like Massachusetts, New York and Connecticut nimbly helped companies and workers reorient themselves, while California utterly failed.

These choices had long term consequences.

In our state, hundreds of thousands of people -- urban and rural, high and low income, and across all industries and occupations -- have been thrown out of work. They suddenly have no way to pay the bills for tuition, utilities, car payments and housing. And studies show that a bout of unemployment lowers lifetime earnings by 20 percent on average, as workers lose skills and experience.

Members of the Minnesota task force heard over and over that this is simply the normal business cycle at work. But it isn't a normal business cycle, just as the Great Depression wasn't. This downturn was caused by financial chicanery and regulatory failure. It created a false boom in wealth and jobs that could not be sustained.

It will be months, possibly years, before unemployment begins to subside. So what can the task force do to prevent further layoffs and create new jobs? Four things:

First, reorient the State's Department of Employment and Economic Development to help businesses of all sizes negotiate the downturn and preserve skills and capital.

Second, offer job subsidies. For about 20 percent of the cost per job of the federal stimulus (at more than $100,000 per job), the state can offer tax incentives and grants to companies for new job creation. Existing companies of all sizes would receive a 30 percent tax credit for the first $14,700 in wages associated with a net new job.

Third, create "workers' centers" as community and workplace-based convening sites for peer group support and service delivery. Nothing helps overcome the humiliation and confusion of unemployment better than an opportunity to get together with those who are in the same boat, preferably your co-workers. In the huge defense implosion of the 1990s, workers' centers helped workers stick with their jobs search and encouraged them to pursue worthwhile training or start new businesses themselves.

Fourth, help local governments maintain services and avoid layoffs. Like the state, our cities, counties and school districts cannot finance by deficit. Minnesota is passing the crisis buck by cutting its support to local units of government.

Ann Markusen is an economist and professor and director of the Project on Regional and Industrial Economics at the University of Minnesota's Humphrey Institute of Public Affairs.