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Six-State Study Finds Industry Supporters Exaggerated Jobs Impact of Shale Drilling

7:50 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim. In fact, in Pennsylvania, shale-related employment accounted for less than half a percent of total nonfarm employment in 2012 (as the figure to the right shows).

These findings come from a new report released today by the Multi-State Shale Research Collaborative — a group of research organizations, including the Keystone Research Center and Pennsylvania Budget and Policy Center, tracking the impacts of shale drilling.

As Frank Mauro, Executive Director of the Fiscal Policy Institute in New York and one of the authors of the report put it: “Industry supporters have exaggerated the jobs impact in order to minimize or avoid altogether taxation, regulation, and even careful examination of shale drilling.”

The Marcellus and Utica shale formations span six states: New York, Ohio, Pennsylvania, West Virginia, Maryland, and Virginia.

To be clear, shale drilling has created jobs, particularly in Pennsylvania and West Virginia, and cushioned some drilling-intensive areas in these states from the worst effects of the Great Recession and the weak recovery. The number of actual shale jobs created, however, is far below industry claims. Shale employment remains a small share of overall employment and has made little difference in job growth in any of the six states studied.

Natural gas development in these states from 2000 to 2008 was largely fueled by high commodity prices. As prices have declined more recently, gas drilling activity has slowed while development of higher-priced oil has accelerated.

Recent trends are consistent with the boom and bust pattern that has characterized extractive industries for decades. It also points to the need for state and local policymakers to collaborate to enact policies that serve the public interest.

You can check out the full report and press release here. We’ll be back here next week with more findings from the report.

More Fun With Shale Jobs Numbers in Pennsylvania

6:28 am in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

Last week, the Marcellus Shale Coalition trumpeted a new claim on the shale drilling industry’s positive impact on Pennsylvania jobs:

Raymond James analysts crunched the numbers, and between 2005 and 2012 almost 90 percent of the job growth in Pennsylvania at that time came from oil and gas jobs … That’s the highest percentage of any state, according to analysts Pavel Molchanov and J. Marshall Adkins, who based the math off data from the Bureau of Labor Statistics.

As meaningless statistics go, this is one of the more meaningless.
front page of the super mister
Here’s why: Since 2005, many states, including Pennsylvania, have created few jobs overall. Pennsylvania averaged 5,704,000 jobs in the 12 months of 2005 versus 5,746,000 for the 12 months ending August 2013 — a 42,000 increase. Given this small increase in the overall number of jobs, it doesn’t take a lot of shale jobs to account for a high percentage of this increase. In other words, 90% sounds like a lot (leaving aside whether the 90% claim is even accurate), but 90% of a small number is, well, a small number.

This leads to two other points. First, why didn’t Raymond James pick 2006? In Pennsylvania, the 12-month job average in 2006 was 5,755,000 — MORE than the most recent 12-month average number of 5,746,000 jobs. Since 2006, Pennsylvania has had no positive job growth, which might lead one to say the Marcellus Shale created infinity percent of the total growth in jobs in Pennsylvania since that year. In fact, with no overall job growth, drilling would have created infinity percent of the total job growth even if it had created just one positive job.

These 2006 calculations help answer why Raymond James started its analysis in 2005: 2005 is far enough back for overall job growth in virtually every state to be positive but small. Starting in 2006 would make the shale shares of overall job growth nonsensical in many states, including Pennsylvania (since overall growth was negative). And going back to 2003 or 2004 would increase overall job growth relative to shale job growth, and begin to convey the reality that shale is a small part of the overall economy. Nice job of cherry picking the period of analysis to fuel a preconceived narrative, Raymond James.

The second point is that Pennsylvania’s high ranking for share of jobs coming from shale since 2005 stems partly from the state’s poor recent jobs performance. If Pennsylvania’s job growth since 2010 had kept pace with national job growth over the same period, we would have roughly another 100,000 jobs today. A higher number for overall job growth since 2010 — and hence since 2005 — would make the modest number of Marcellus Shale jobs created since 2005 substantially lower than 90%.

So in a strange way the Raymond James/Marcellus Shale Coalition claim about shale job growth since 2005 is partly a celebration of Pennsylvania’s disappointing overall job growth since 2010. Does the Marcellus Shale Coalition really mean to draw attention to this?
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‘This Is What the Middle Class Looks Like’

9:09 am in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

"This Is What Democracy Looks Like"

But what does a real middle class look like?

“This is what democracy looks like.” Even though this chant originated with the Seattle protests against the World Trade Organization (WTO), which haven’t yet led to major reforms, the phrase nonetheless captures the idea of a social movement that has crystallized its demands and has a better chance to succeed because of it. Other examples include the right to vote in the civil rights movement, or the fight to legalize gay marriage, a simple modern demand that culminates a fight for equality in all its dimensions.

One challenge in the U.S. fight for economic justice since inequality began to yawn wider in the 1970s has been the lack of a simple demand that either working people or elites thought could bring back the middle class. Having such a demand fuels social movements because it gives members of the movement confidence — conviction — that there is a way for the world to give them what they want. It also fuels social movements because it gives the broader society a way to let the protesters get a win.

The fast food workers engaging in one-day strikes across the country may be on the verge of crystallizing a simple demand to which their low-wage employers could accede — and, in the process, cracking the code to the next U.S. middle class.

Today’s story on these strikes in The New York Times says that the organizers aren’t actually clear yet on the path to victory. The demand is a $15-per-hour wage — a ticket to the middle class. But will progress result from a higher minimum wage, local living wage requirements for big chains, or companies themselves raising wages to get off the front page? (This is where you say in your best pompous pundit voice, “Well, ah, um, cough, good question.”)

Because these protesters have a practical, confident vision of the end point they want — an economy that pays lower-wage workers a middle-class wage (so what if Big Macs cost 50 cents more) — they have a good chance of finding the mechanism that can get them there and keep them there (or forcing the rest of us to figure out the mechanism).

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Pennsylvania’s Unremarkable Private-Sector Job Performance

1:28 pm in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

Philadelphia Daily News Columnist John Baer is right to suggest that Governor Corbett’s jobs performance since January 2011 is less than “remarkable.”

Baer’s critique comes in response to the Governor’s first re-election campaign ad touting “a remarkable 116,000 new private-sector jobs” since he came into office in January 2011. Not so fast, Baer writes:

When one looks at net jobs here since January 2011, the picture is less than “remarkable.” The current net jobs gain is not 116,000. It’s 75,100.  Among the 10 largest states, of which we’re sixth, we gained the fewest jobs. … data on the four states with less population (Ohio, Georgia, Michigan and North Carolina) show each gained double the number of jobs we did, or more.

Governor Corbett gets to 116,000 by limiting his count to private-sector jobs only, not the tens of thousands of teachers, police officers and other public servants who lost their jobs following years of state and local budget cuts.

Even if you restrict your analysis to the private sector, Pennsylvania’s private-sector job growth has almost stalled since about a year into the Governor’s term. To see that, take a look at the chart below.

The chart shows cumulative private-sector job growth in Pennsylvania since January 2011, the month Baer uses as his point of reference. We rely on data from a survey of employers by the Bureau of Labor Statistics known as the “establishment” survey. There is another employment survey of households done monthly by the U.S. Census Bureau, and over short periods of time, the two can differ — but as Mark Price has explained, both surveys typically tell the same story about the health of the labor market over the long haul.

Looking at data from the establishment survey, Pennsylvania’s private-sector job growth was relatively robust in 2011, yielding a total of 100,000 net new private jobs by March 2012. In the 14 months since then, however, the state has seen private jobs growth of less than 5,000; private job growth is less than 20,000 even if you use a three-month moving average for the same period.

Another way to gauge how “unremarkable” the state’s private job performance has been is to compare it to the national level. We do this by first computing percent job growth for the U.S. since January 2011 and then computing what private job growth in Pennsylvania would have been if the state’s percent job growth had kept pace with the national average. The gap between what Pennsylvania’s job growth would have been if it matched the national rate and actual Pennsylvania job growth is labeled “Pennsylvania’s growing private job gap” in the next chart.

What explains Pennsylvania’s private-sector job growth trends since early 2011 relative to the nation?

One hypothesis for Pennsylvania’s strong showing in 2011 is that the robust job growth that year partly reflected the policies of outgoing Governor Ed Rendell. A related hypothesis is that the policies of Governor Corbett, most prominently the impact of budget cuts and public-sector layoffs, took a year or so to have an impact on the private-sector economy.

Yet another factor could be the natural gas industry. Although the impact of drilling on Pennsylvania jobs has been exaggerated, it did have some impact. Since 2011, however, drilling and natural gas employment have ebbed. The flat-lining of private-sector job growth in Pennsylvania since the first quarter of 2012 makes abundantly clear that the natural gas industry alone never amounted to an adequate jobs strategy for the state.

A final factor is slow population growth in Pennsylvania. From April 1, 2010 to July 1, 2011, population growth in Pennsylvania was 0.5% compared to 1.7% nationally. When the economy is at full employment, the growth of the working-age population has more impact than any other factor on job growth — as a result, job growth in states with slowly-growing populations should not be expected to keep pace with that of the nation. However, when unemployment rates are well above full employment, as at present, then state job growth rates are more likely to cluster close to the national average and less likely to be impacted primarily by relative rates of long-term population growth.

Imagine … A Minimum Wage Your Daughter Could Live On

11:57 am in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

The Australian minimum wage this year is $15.96 per hour. I know this mostly because my daughter lives in Melbourne these days (not forever, I hope). When she arrived there 18 months ago, she got a job at a minimum-wage restaurant. She earned enough to cover her rent and other expenses.

What brought the idea of a much higher minimum wage to mind is a blog post from Dean Baker of the Center for Economic Policy Research. Dean estimates that the U.S. minimum wage today would be $16.54 per hour if it had kept pace with U.S. productivity growth since 1947.

For those with knowledge of economic history (both of us), a minimum wage that increases its buying power every year does not seem far fetched, even in the good old United States. The U.S. minimum wage DID increase with productivity growth from 1948 to 1968. This linkage (see Dean’s chart below) resulted from the combined impact of two mechanisms: manufacturing wages kept pace with productivity growth thanks to collective bargaining in mass manufacturing (starting with the famous auto industry “Treaty of Detroit” in 1948); and Congress periodically increased the minimum wage to bring it back up to 50% of the average manufacturing wage.


Click on the chart above for a larger view
In recent decades, the most ambitious aspiration in U.S. political debate has been that the minimum wage keep pace with inflation (even Mitt Romney was for this briefly — after he was against it and before he wasn’t sure any more).

If you think about it for a second, a minimum wage that keeps pace with inflation is a fairly pathetic aspiration. It means that our lowest-wage workers get to have their living standards stay the same forever, even as the economic pie keeps growing with increases in productivity.

Wages — and minimum wages — that keep pace with productivity growth express a different and completely practical aspiration: the idea that workers at all levels should share in the expanding economic pie. Fair reward for hard work. Even sounds like a fundamental American value. Let’s get back to it. If we did, Charlotte might even come home.

Pennsylvania Private Job Performance Through the Looking Glass

3:39 pm in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

In the 1890s, scientist George Stratton reported that, after four days of wearing a lens that inverted his vision, his brain reprocessed what he saw and flipped everything back up the right way.

John Micek’s Friday article brought this experiment to mind. Micek quotes Pennsylvania House Speaker Sam Smith summing up the accomplishments of the House of Representatives in the 2011-12 legislative session: “We … focused on the economy and private-sector job creation.” Majority Leader Mike Turzai echoed Smith saying: “We kept our commitments on fiscal responsibility and private-sector job-creation.”

Let’s take a look at some actual job numbers.

Between January 2011 (the start of the current legislative session) and September 2012 (the latest data available), the number of private-sector jobs in Pennsylvania grew by 87,000, an increase of 1.8%. In this period, Pennsylvania ranked 31st out of the 50 states for private job growth by percentage. National private-sector job growth equaled 3%.

If you look at the last 12 months, from September 2011 to September 2012, Pennsylvania’s private-sector job ranking falls to 35th, with the state’s private-sector job growth equal to about half the national rate.

Now, compare that to job growth between January 2010 and January 2011, when the commonwealth ranked 12th among the 50 states with job growth of 1.8% (compared to the national rate of 1.3%).

As our summer policy brief explained, part of what is dragging down private job growth in Pennsylvania are deep cuts to education and other services that led to the layoff of 20,000 teachers and thousands of other public-sector workers in 2011. As a result, private-sector job growth also is not keeping pace with more than three out of every five states.

I’d hate to see the numbers if the Legislature hadn’t kept its commitments on private-sector job growth.

‘How ’bout No, You Crazy Dutch….’

1:40 pm in Uncategorized by ThirdandState

By Mark Price, Third and State

The Only Proper Villian We Could Find From the NetherlandsOn Monday night, the Lower Allen Township commissioners in Cumberland County considered a proposal from Ahold USA, the corporate parent of Giant Food Stores, for a $400,000 property tax abatement on a meat repackaging plant on which the company has already broken ground. (Ahold USA is itself the subsidiary of the Netherlands-based Ahold.)

The company has neglected a basic principle of the economic development game through which companies extract subsidies and tax breaks from states and localities where they were going to build anyway: until you have the subsidy in hand, don’t give away that it will not impact your location decision.

But since the company made this error, the title of this blog post, taken from the Austin Powers movie Goldmember, should suffice for the township’s answer. (It is pure coincidence that Goldmember, a Dutchman pictured to the right, has a gold G on his velvet sweatsuit.)

Here are two stories on this issue.

The Lower Allen commissioners should continue to say no to Ahold’s request because it is a simple giveaway that diverts needed tax revenue from the township. It would be that much costlier if the West Shore School District (which has absorbed $2.2 million in state budget cuts since 2010-11) and Cumberland County (where property taxes for most homeowners and businesses may rise by 22% next year) follow suit.

The repackaging plant will consolidate meat cutting operations for Ahold USA’s stores in the mid-Atlantic region. Customers will no longer get their meat freshly cut in the store, instead, the meat cutting and packaging function is being moved to a central location with easy access to the interstate. Some meat cutters will lose their jobs in the process, while others might be offered jobs at the new facility, at a lower wage.

For its $400,000, Lower Allen Township is being promised between 450 and 800 jobs; there is no word on how many jobs will be lost at Giant Food Stores in the region or at the company’s Maryland division.

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Fact Checking PA Governor Corbett’s Jobs Record…and Some Unsolicited Advice

2:07 pm in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

Governor Tom Corbett’s administration has a new summary of Pennsylvania’s recent job performance. Today’s news that Pennsylvania’s unemployment rate is as high as the national unemployment rate underscores, however, that the state’s recent jobs record is not  good. Let’s take a closer look.

PA vs. U.S.: The Corbett jobs summary notes that Pennsylvania’s unemployment rate is below the national rate — and it was when the summary was first released. This was not a new trend: the Pennsylvania rate was a point or a point-and-a-half below the national rate for most of the four years before Governor Corbett took office. A year ago, the gap between the Pennsylvania and U.S. unemployment rate was still statistically significant. (See Table A.) But the gap between the two rates — the “Pennsylvania advantage” — has been shrinking steadily since 2010 until the Pennsylvania rate finally climbed to the U.S. level in August 2012, both equaling 8.1%.

Private-sector Job Growth: While the administration touts private-sector job growth in 2011, the numbers reflect a national trend, rather than a unique Pennsylvania story.

The U.S. economy has had 30 consecutive months of private-sector job growth. In fact, Pennsylvania’s rank for the percent growth in private-sector job growth has fallen from 8th in 2010 to 36th in the 12 months ending in July 2012. One of the reasons that Pennsylvania’s private-sector job-growth ranking is down is the deeper cuts in public employment in Pennsylvania compared to other states. Deep cuts to Pennsylvania public schools and colleges led to a loss of 14,000 education jobs alone in 2011.

These layoffs impact the classroom and Main Street too. Unemployed teachers, like unemployed factory workers, don’t have money to spend, which affects the broader economy.

Manufacturing Job Growth: Manufacturing jobs growth improved in 2011, but again reflects national trends. In fact, Pennsylvania’s manufacturing job growth since early 2010 is slightly below half the national increase. (See The State of Working Pennsylvania 2012.)

New Hires in Marcellus Shale: Not this one again. The administration is touting natural gas industry growth by citing the number of new hires. As we’ve explained repeatedly, new hires are not new jobs (most new hires replace people who quit or are fired). In fact, the number of new hires is basically a meaningless number. Statewide there were 580,400 new hires during the 2nd quarter in Pennsylvania, while total non-farm employment rose between the 1st and 2nd quarter by less than 300 jobs. In other words, the only reason to cite new hires is to make the job gain seem substantially larger than it really is.

The gas industry has led to some job growth in Pennsylvania, just not on the scale claimed by the industry. Between the 4th quarter of 2008 and the 4th quarter of 2011, employment in the core Marcellus Shale industries grew by 18,000. That gain was largely wiped out by the loss of 14,000 education jobs in just one year. Even using the most generous estimates, employment in the Marcellus Shale in direct and ancillary industries in the 4th quarter of 2011 (as published by the Pennsylvania Department of Labor and industry) was 238,400 – about 4.2% of total state employment.

Here’s the unsolicited advice: Twenty months into Governor Corbett’s first term, there is still time for the Governor to pursue policies that will improve Pennsylvania’s job performance. There are multiple options that have strong bipartisan and business support. For example, investing in transportation infrastructure as recommended by the Governor’s own transportation commission.

In manufacturing and workforce development, the administration is also saying some of the right things. But talk is cheap: we need actual investment in skills and innovation if our job performance is going to improve relative to other states and the nation.

The Manufacturing Jobs Score by President Since 1948

1:02 pm in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

After former President Bill Clinton claimed the “jobs score” was better in Democratic presidential administrations than in Republican ones, Colin Gordon of the University of Iowa and I did some research to see how presidential administrations scored on manufacturing job creation since Harry Truman. Our findings are published on AlterNet this morning.

We thought it was important to do this analysis because manufacturing jobs are typically family-supporting jobs — in other words, good jobs. Manufacturing also plays a critical role in the growth of overall living standards, a point on which there is bipartisan consensus.

What’s the punchline? Democratic administrations (seven since 1948) on average add around a million manufacturing jobs every four years. Republican administrations (nine since 1948) lose about a million manufacturing jobs every four years.

We think these findings will be especially salient in battleground states such as Pennsylvania where voters in manufacturing-intensive regions make up a large share of swing voters.

For more, read our full piece on AlterNet.

Post-Labor Day Thoughts: Middle Class Can’t Afford Another Lost Decade

8:13 am in Uncategorized by ThirdandState

By Mark Price, Third and State

Labor Day 2012 is behind us, but the challenges confronting the middle class are not.

As we do each year around this time, the Keystone Research Center has released the State of Working Pennsylvania. My co-author, a.k.a El Jefe, had a Labor Day op-ed in the Harrisburg Patriot-News where he laid out the theme of this year’s report — namely, that the middle class in Pennsylvania and the U.S. cannot afford another lost decade.

The next three figures lay out the major elements of this year’s State of Working Pennsylvania: employment growth over the last decade has been weak (Figure 1.10); as a result, incomes over the last decade declined (Figure 1.11); and in the first year of the recovery and of the new decade, income inequality resumed its growth as the top 1% increased their share of all income (Figure 5.1). 

With job growth weak and many policymakers advocating that we lay off more teachers and continue to put off needed investments in infrastructure, we are very concerned that working and middle-class families may end the next decade with less income from work than they started with in 2010.