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PA’s July Jobs Report Is Out, and It’s Not Good News

9:18 am in Uncategorized by ThirdandState

By Mark Price, Third and State

Pennsylvania’s unemployment rate shot up three-tenths of a point in July to 7.9%. Just two months before in May, the rate was 7.4%. Total nonfarm jobs in the state were down 3,100 in July.

That’s not all. There was a big revision downward with the state’s nonfarm payroll count for June: it was originally reported as 5,729,700, but was revised down by 17,400. To put it in some perspective: Pennsylvania reported a June jobs gain in its report last month of 14,600 jobs. After the latest revisions, Pennsylvania actually lost 2,800 jobs in June.

Industry-wise, the July report is a mixed bag. Mining; trade, transportation & utilities; information; professional & business services; and other services saw gains. Constructions; manufacturing; financial activities; education & health services; leisure & hospitality; and government saw losses.

Overall, July was not a good month for the labor market in Pennsylvania, with employment falling in both the household (-10,000) and establishment (-3,100) surveys, and, of course, with the unemployment rate rising to just shy of 8% and shamefully close to the national unemployment rate of 8.3%.

I say shamefully because Pennsylvania weathered this recession better than most states and early in the recovery posted strong job gains. The Pennsylvania advantage coming out of the recession is being slowly whittled away by the persistent loss of public-sector jobs, mostly in local school districts, that has followed deep cuts in state funding.

I wouldn’t panic over these numbers; there is no reason to believe the Pennsylvania or national economy are headed into a recession. Growth just remains disappointingly weak and will likely remain so through the end of the year.

The Myths Behind Governor Corbett’s PA Budget Myths

7:48 am in Uncategorized by ThirdandState

By Sharon Ward, Third and State

Governor Tom Corbett’s May 21 newsletter offered up responses to five “myths” the administration claims are circulating about his proposed budget for next year. The Pennsylvania Budget and Policy Center examined these myths and the myths behind the myths to give you a clear picture about what is fact and what is fiction in Harrisburg.

Governor’s Myth #1: Pennsylvania spends more money building prisons than building schools.

We’re not sure where this one came from, but we will give it a whirl.

Fact: The Corbett administration’s budget includes a moratorium on new school construction projections, and NO FUNDING for school district projects in the pipeline.

Fact: If the Governor’s proposed plan for higher education is adopted, Pennsylvania will spend twice as much on prisons as it does on colleges. In 2009-10, the state’s corrections budget was $1.8 billion and college funding was $1.5 billion. If the Governor had his way, Pennsylvania would spend $1.9 billion on corrections and $980 million on colleges in 2012-13.

Fact: It costs the state much more to house prisoners than it does to educate a child. In 2011-12, Pennsylvania will house 49,000 inmates at a cost of $35,188 per inmate and spend $9.3 billion to educate 1.8 million students at a cost in state dollars of $5,305 per child.

Fact: It is better to build schools than to build prisons.

Governor’s Myth #2: The reductions in higher education funding will cause universities to raise tuition.

Well, cutting college funding is certainly not going to help keep tuition down.

Fact: Public subsidies keep college tuition more affordable. In 2009-10, the average cost (nationally) of a public four-year college education was $15,014, while the average cost of a four-year private college was more than double at $32,790.

Fact: From 1999 to 2011, Pennsylvania’s state funding for higher education fell by 12%.

Fact: The Governor and General Assembly cut public colleges by 20% last year, and the Governor proposed to cut 30% more this year.

Fact: Pennsylvania ranked 46th in public college funding as a share of personal income in 2011-12.

Fact: Our economy can’t grow if our children don’t have a college education.

Governor’s Myth #3: The proposed budget reduces funding for K-12 education and will force school districts to raise property taxes.

That’s no myth, that’s a fact.

Fact: The budget proposed by Governor Corbett and enacted by the General Assembly in June 2011 gave school districts $860 million less than they received the previous year. That included a reduction of 7%, or $421 million, in the basic education subsidy.

Fact: The Governor’s cuts killed jobs. School districts cut programs, raised taxes and eliminated positions. In 2011, the state lost 14,000 jobs in public schools and universities.

Governor’s Myth #4: The elimination of cash assistance will mainly hurt children and victims of domestic violence.

Fact: In February, the Governor proposed eliminating the General Assistance program. The Governor is right: most of those affected are people with a permanent disability waiting for approval for Social Security disability benefits, or those who have an addiction and are eligible to receive the $200 monthly grant for seven months, in their lifetime.

Fact: Women and children lost their health care, not cash assistance, when the Department of Public Welfare did a quick and dirty eligibility review and threw 88,000 kids out of state health insurance programs. Moms, seniors and people with disabilities (the only ones who can get health care coverage through Medical Assistance) lost their coverage too.

Fact: The budget cuts vulnerable adults as well as children. Do you feel better now?

Governor’s Myth #5: The proposed budget reduces funding for the arts.

Fact: The Governor has level-funded grants for the arts for two years. What has gone by the wayside is arts and music education that have been slashed by school districts as a result of the cuts to education (see Myth #2).

PA Job Numbers Out, The War On Unemployment Insurance, and Inequality

8:36 am in Uncategorized by ThirdandState

By Mark Price, Third and State

A pile of rusty pennies.

Photo by Davidd

Happy Sunny Friday, people! Now for the not so good news. The job numbers for Pennsylvania came out Thursday, and the overall picture was somewhat disappointing. The unemployment rate edged down slightly to 7.4% and nonfarm payrolls declined by 600 jobs. Focusing on the jobs data, the biggest loser in April was construction, which shed an eye-popping 5,400 jobs. That is a big swing at a time of year when construction projects should be ramping up. Odds are that loss is driven by sampling error rather than real trends in construction activity. Another troubling stat was the loss of 1,700 jobs in the public sector.

Because monthly data are somewhat erratic, you shouldn’t make too much out of any one-month change in employment overall or within a sector. Looking at nonfarm payrolls since October, the jobs picture is somewhat brighter with Pennsylvania adding, on average, 3,900 jobs a month. So Pennsylvania’s labor market, like the national labor market, is continuing to recover.

Now for the bad news: if you were hoping the Pennsylvania economy would finally return to full employment by 2015 (remember, the recession started in December 2007), nonfarm payrolls need to grow by about 10,000 jobs a month. So by that metric, we are a long way from fully recovering from the worst recession since the Great Depression.

Read the rest of this entry →

Predatory Payday Lending Bill Flies Out of Cramped PA House Committee

3:01 pm in Uncategorized by ThirdandState

By Mark Price, Third and State

Room 148 of the State Capitol might as well double as a Capitol broom closet. That’s where the House Consumer Affairs Committee this morning rushed out amendments to House Bill 2191, which legalizes predatory payday lending in Pennsylvania.

The amendments to HB 2191 were misleadingly pitched as adding more consumer protections to the bill. Even the Navy Marine Corps Relief Society took a look at these amendments and said they do “nothing to mitigate the already harmful aspects of HB 2191,” and that one amendment “actually worsens the problem it claims to solve.”

What is Payday Lending? Payday lending encompasses small loans, usually for two weeks or less, that require a post-dated check or electronic access to a borrower’s bank account as a condition of the loan. Fees and interest in states that allow payday lending typically total $15 to $17 for every $100 borrowed — amounting to an effective annual percentage rate of more than 300 percent for a loan due in full in 14-days.

One focus of the amendments this morning was language banning renewals or rollovers of a payday loan, as if that was a solution to stopping the long-term cycle of debt. It is not.

Payday lenders support amendments that ban renewals and rollovers because they know how to circumvent them. To avoid appearing to “rollover” or “renew” the debt, lenders ask the borrower to pay off the old loan and take out a new loan by paying a new fee and writing another check. Also, in a practice called “touch and go,” lenders take a cash “payoff” for the old loan that they immediately re-loan with new loan funds the next day.

Here’s how it works: To repay the first loan, the borrower lets the lender cash the original post-dated check or pays the lender $300 in cash to tear up the check. In either case, they borrow again immediately or as soon as allowed by law. Read the rest of this entry →

March Job Numbers For Pennsylvania and CEO Pay

1:37 pm in Uncategorized by ThirdandState

By Mark Price, Third and State

The Pennsylvania Department of Labor and Industry released new data for March on Pennsylvania’s employment situation. According to the household survey, the unemployment rate edged down slightly to 7.5%, and the survey of employers showed healthy growth in nonfarm payrolls of 7,800 jobs.

As always, caution should be exercised in interpreting a month change in employment statistics.

In terms of levels, there were big gains in Leisure and Hospitality (7,000), Trade Transportation and Utilities (4,000) and Manufacturing (2,100). We will not have full information until the fall whether the job losses in the public sector will put a drag on employment growth in 2012, but the March data shows we are off to an uncomfortable start, with 2,500 jobs lost.

Over the last several months, Pennsylvania nonfarm payroll counts have been particularly volatile, showing big one-month gains and losses thanks to a combination of unusually warm weather and some technical issues. On average over the last six months, Pennsylvania has added just under 6,000 jobs a month. We need about 10,000 jobs a month to move back to full employment by March 2015 (three years from now).

While unemployment remains high today and for the foreseeable future, the distance between CEO pay and the pay of the typical worker reached an all time high in 2011.

Corporate CEOs are now making 380 times the salary of the average American worker, a record high and the biggest pay gap in the whole world, according to the 2011 AFL-CIO’s Executive Paywatch.

Dumb and Dumber PA State Construction Policies

11:25 am in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

I’ve got an idea: let’s employ low-wage, low-skill, and sometime out-of-state workers on small and medium-sized state-funded construction projects, with no benefit to taxpayers and negative impacts on local economies.

Sound like a stupid idea? That’s because it is.

Here’s the backdrop: Pennsylvania’s prevailing wage law requires that workers on state-funded construction projects be paid a wage in line with what most other workers in their trade are paid within a certain geographical area.

Research in peer-refereed academic publications shows that the law could be called the quality construction law because it helps ensure the use of skilled workers on state projects. Where prevailing wage laws exist, training investment, worker experience, wages, benefits, and safety levels are all higher than where these laws do not exist.

Overall construction costs are the same with or without prevailing wage laws. The prevailing wage law, however, makes it impossible for contractors that employ low-wage, out-of-state workers to win bids on state projects: it ensures that jobs go to local workers, who spend their money at local businesses.

More middle-class jobs, stronger local economies, higher quality construction, no cost to taxpayers: what’s not to like?

Unfortunately, some members of the Pennsylvania Legislature seem unwilling to leave well enough alone. Through House Bill 1329, these lawmakers want to make the prevailing wage law to apply to less state-funded construction work. How so? By exempting projects of less than $185,000 from prevailing wage standards. Currently, the law applies to all state-funded projects of $25,000 or higher.

Why one wants a threshold at all is not clear; eight states don’t have one. They have, instead, a clear policy of supporting a high-wage, high-skill approach to all state-funded construction.

Of the 32 states that have a prevailing wage law, only three have a threshold as high as that proposed in House Bill 1329.

Raising the threshold may not be as stupid a policy as eliminating the prevailing wage law altogether, or carving big parts of public construction (e.g., school projects) out of the law. But it’s still dumb.

For a complete list of our research and commentary on Prevailing Wage see our Prevailing Wage Issue page.

Prevailing Wage Opponents Fail to Look at the Research

9:16 am in Uncategorized by ThirdandState

The Final Part of a Three-part Series on Prevailing Wage by Mark Price and originally published at Third and State. Read Part 1. Read Part 2.

In the first two posts of this series, I explained why the numbers being tossed around by advocates of repealing prevailing wage don’t add up. I explained that the claims of cost-savings are not based on any actual experience and that they represent the result of laughable hypothetical, or “what if,” calculations. 

This leads to the most important point that the Pennsylvania School Boards Association, the Pennsylvania State Association of Boroughs, the Harrisburg Patriot-News Editorial Board and others keep missing: we can do much better than a hypothetical when assessing the impact of prevailing wage laws.

There is a body of research that examines construction costs (and other construction outcomes, like safety, training investment, wages, benefits, etc.) in states with and without prevailing wage laws as well as in states that eliminated prevailing wage laws. We don’t have to conjecture what “might” happen: we can look at what did happen. The preponderance of the evidence shows that prevailing wage laws do not raise construction costs.

Back in the late 1990s, Pennsylvania actually ran this real-world experiment itself — we lowered our prevailing wage levels, particularly in rural areas. That means we can look at what happened to construction costs. What happened is the same thing that has happened in other places — lower prevailing wages did not translate into lower construction costs. 

Specifically, the Keystone Research Center’s 1999 study of this late 1990s Pennsylvania policy experiment examined changes in public school construction bids when Pennsylvania’s prevailing wages were lowered substantially in rural areas. Keystone found no association between the number of occupations in which the prevailing wage was lowered and the price per square foot of school construction bids. If anything, construction bids appeared to go up more in areas where prevailing wages were lowered more.

Advocates of repeal often point to sympathetic construction managers in the public sector who testify, based on their expertise, that prevailing wage laws raise costs. Not only did the Keystone study find no statistical evidence of a cost difference during the period wages were lowered, but the study highlighted two revealing instances of construction managers making wild predictions that just didn’t come true:

The recent experience of two Pennsylvania school districts show that even increases in legally mandated prevailing wage and benefits rates do not necessarily increase public construction costs. In March 1999, after two months of legal uncertainty about required prevailing wage levels, [the Pennsylvania Department of Labor and Industry] began issuing prevailing wage rates that were higher than the 1999 rates. The Blue Mountain School District, in Schuylkill County, was planning to renovate its high school.  In April 1999, the school district’s construction manager estimated that construction costs would increase by about $670,000 as a result of the higher prevailing wage and benefit rates. But when bids for the project were opened on May 6, the low bids, which were expected to be about $15.1 million, came in at only about $13.8 million, almost 9 percent below the anticipated level. And in April, bids for a middle school construction project in Tamaqua, which used the same prevailing wage and benefit rates as the Blue Mountain bids, also came in under budget estimates.

Read the rest of this entry →

Prevailing Wage Opponents Fail Labor Market Statistics 101

7:47 am in Uncategorized by ThirdandState

Commonly available statistic calculator, alas unused (photo: andresrueda/flickr)

Commonly available statistic calculator, alas unused (photo: andresrueda/flickr)

Part Two of a Three-part Series on Prevailing Wage by Mark Price, originally published at Third and State. Read Part 1.

The overwhelming weight of evidence based on the actual cost of public construction projects shows that prevailing wage laws do not raise costs. Therefore, advocates of repealing the law in Pennsylvania ignore this evidence. Instead of “evidence-based policy,” we have “lack-of-evidence-based policy.” Go figure.

Repeal advocates use a hypothetical calculation that makes assumptions about cost, rather than empirically examining the relationship between higher wages and total construction costs. (As discussed here, even these hypothetical cost estimates don’t make sense once you apply real world data to how much labor costs represent of total construction cost.)

Another key ingredient in the hypothetical calculations used by proponents of repeal is the claim made most recently by the Pennsylvania State Association of Boroughs (PSAB) that “the prevailing wage is 30 percent to 60 percent higher than the average wage for the same occupation.”

This claim is based on an update of a flawed calculation by the Commonwealth Foundation. It compares the prevailing wage levels by trade as set by the Pennsylvania Department of Labor & Industry with the average wages for construction occupations reported in Occupational Employment Statistics (OES). The prevailing wages are 30% to 60% higher than the OES averages.

The problem is, the Commonwealth Foundation/PSAB calculation is the proverbial apples-to-oranges comparison: it measures different portions of the construction industry.

OES data include wages paid to workers employed in the residential construction sector — smaller, less-complex projects than prisons, bridges, schools and other state-financed construction. Residential construction relies on workers less skilled and experienced than those needed for larger state projects.

Indicative of this skill gap in Pennsylvania is the fact that construction workers employed in nonresidential construction — most of which is private sector, not public — earn 52% more than construction workers in the residential construction sector. In other words, the gap between the occupational prevailing wages set by the Pennsylvania Department of Labor & Industry and average construction wages reported by OES reflects the wage gap between residential and nonresidential construction.[1] (See Table 1 below.) Read the rest of this entry →

Prevailing Wage Opponents Fail the Laugh Test

7:19 am in Uncategorized by ThirdandState

(photo: martinsphotoart, flickr)

(photo: martinsphotoart, flickr)

Part One of a Three-part Series on Prevailing Wage by Mark Price and originally published at Third and State.

Prevailing wage laws have long operated nationally and in states as a check against the tendency of the construction industry to degenerate into destructive wage and price competition. Such competition can drive skilled and experienced workers from the industry, reduce productivity and quality, and lead to poverty-level jobs, all without saving construction customers any money.

In an exhaustive review of the research on the impact of prevailing wages on contracting costs, Nooshin Mahalia concluded:

At this point in the evolution of the literature on the effect of prevailing wage regulations on government contract costs, the weight of the evidence is strongly on the side that there is no adverse impact. Almost all of the studies that have found otherwise use hypothetical models that fail to empirically address the question at hand. Moreover, the studies that have incorporated the full benefits of higher wages in public construction suggest that there are, in fact, substantial, calculable, positive benefits of prevailing wage laws.

Although the weight of evidence suggests prevailing wage laws do not raise costs, advocates for repealing the law in Pennsylvania continue to repeat some version of the following:

Prevailing Wage law also harms taxpayers, as it forces them to pay higher labor costs on public construction projects. Construction companies forced to pay union-inflated wages and benefits will pay upward of 30 percent more in labor costs for identical work on private sector projects. This adds a little more than 20 percent to the cost of every taxpayer-funded construction project — resulting in an estimated $1 billion cost for state and local taxpayers each year.

- Matthew J. Brouillette
President & CEO of the Commonwealth Foundation
March 22, 2011

What is the source of this 20% saving claim? One source is Nathan Benefield, the research director of the Commonwealth Foundation, in this 2009 blog post. Read the rest of this entry →

PA Must Reads: Predicting School Districts In Distress, Privatization and Hello Düsseldorf!

7:17 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

The Harrisburg Patriot-News reports this morning on a new study that predicts fiscal distress in Pennsylvania school districts thanks to state budget cuts.

In a report titled “Sounding the Alarm,” the Pennsylvania State Education Association describes the impact that state funding cuts and policies are having on school districts’ ability to meet the educational needs of students.

In it, the union calls on the Legislature and Gov. Tom Corbett to put more money into public schools and remove the limitations on property tax increases required by the state law known as Act 1.

But the Corbett administration suggests there’s no reason for alarm.

In a cringe-inducing moment from that Patriot-News story, a spokesman for the Corbett administration chose not to read the study before reaching into his trusty public relations rapid-response handbook:

Tim Eller, Department of Education press secretary, said having only one or two districts out of 747 public school entities encountering severe fiscal distress is no reason to sound the alarm.

From the study:

The authors of a study published recently in the refereed Journal of Education Finance conclude that districts that are relatively small, rely heavily on a single source of revenue, have little buffer within their budgets, and have relatively high amounts of debt are more likely than other districts to cut classroom expenditures by at least five percent in a given year (Trussel and Patrick, 2012). The strongest of these indicators of underlying fiscal weakness is heavy reliance on a single source of revenue.

Districts entered 2011-12 in varied financial shapes. Applying the model from the Trussel and Patrick study to Pennsylvania school districts, and combining those results with trend data from districts’ General Fund balances over the last few years, strongly suggests that many districts across the state faced elevated risks for making severe cuts to classroom services, even before the other cost and revenue pressures reviewed below are taken into account. Read the rest of this entry →