More big layoffs last year
Vermont saw a jump in extended mass layoffs in 2011. A mass layoff occurs when an employer lets go 50 or more people within a five-week period. To be counted as extended, at least 50 of those people have to be out of work for at least 30 days. In 2009, in the depths of the recession, more than 5,700 Vermonters lost jobs as the result of 35 extended mass layoffs. The number dropped in 2010, but last year saw 27 extended mass layoffs, hitting almost 4,500 people. The bulk of those layoffs happened in the spring, before Tropical Storm Irene arrived.

Smaller average paychecks
A slight decrease in the average workweek and essentially no change in average hourly wages meant that Vermonters’ average weekly earnings dipped a little in 2011. That was the average of all private sector workers, but the story varied by sector. Professional and business services saw the biggest increase in weekly earnings last year, about 6.5 percent; earnings also rose in manufacturing. The other major sectors experienced declines.

Download the Jobs Brief in PDF.

Fewer jobless claims
Vermont had the fourth-lowest unemployment rate in the country in March, even as more than 4,500 workers filed new claims for unemployment compensation. Initial unemployment claims hit a peak in December 2008, when more than 8,600 Vermonters filed. Typically, first-time jobless claims rise during the winter months and drop in the summer. The number of applicants at the peaks has declined since the recession officially ended, and the monthly average of new claims has fallen for two years.

The end of extended unemployment benefits
Barring a sudden spike in unemployment, Vermonters will no longer be eligible for extended unemployment compensation after the end of this year. In the depths of the recession, jobless workers who had used up their 26 weeks of regular unemployment compensation could qualify for federal emergency unemployment compensation programs (EUC08 Tiers I-III) and a state program that together provided up to 60 weeks of additional compensation. After May, the Tier II program—providing 14 weeks’ benefits—will not be available in states with unemployment rates lower than 6 percent. All EUC08 programs are scheduled to expire at the end of 2012.

Download the Jobs Brief in PDF.

A new normal for joblessness?
At 5.6 percent, Vermont’s annual unemployment rate for 2011 was the fifth lowest in the country. But it was higher than Vermonters are used to. The annual rate has been lower than 5.0 percent during 22 of the last 30 years. And unemployment is not falling as quickly as it did following the recessions of the early 1980s or early 1990s. The 2000s were a dismal decade for job creation in Vermont even before the recession hit in December 2007. And employers haven’t yet replaced all the jobs lost since then.

The winter blues, rearranged
The U.S. Bureau of Labor Statistics has just finished its annual benchmark adjustments, and it turns out that Vermont had fewer jobs last year than originally thought. A year ago, BLS reported Vermont had almost 305,000 jobs in January, February, and March. The new revised figures show just under 300,000 during that period. Vermont’s unemployment numbers also were revised. The new numbers show somewhat higher unemployment for the first half of 2011, but somewhat lower in the second half.

Download the Jobs Brief in PDF.

State House; February 10, 2012; 10:45 AM

Mr. Chairman, members of the Committee

My name is Paul Cillo.  I’m the President of the Public Assets Institute here in Montpelier.  We’re an independent nonprofit that analyzes Vermont’s tax, budget, and economic policies from the perspective of ordinary Vermonters.  I’ve passed around some materials that I will be talking with you about today. I’ve also included a card with our contact information including our web address.  All of our published reports are available on our website.

I appreciate the opportunity to talk with the Committee this morning about the recent report from the Agency of Commerce and Community Development on the Vermont Employment Growth Incentive Program.

First of all, let me say that while I understand the basic purpose and mechanics of the program; I’m not an expert on it.  I’m interested in talking with you today because the Legislature is at a point where it needs to decide whether to continue the program beyond June 30, 2012.   While I know it’s hard with all of the legislative issues swirling around to think about the big picture, this is a good time on this issue to do just that.

So there are three things I would like to talk with you about:  the first is whether cash incentives to businesses are a good use of public money; second how do we determine how well we’re doing as a state, and third, what’s the alternative to cash incentives.

Cash incentives.

The idea behind the VEGI program and its predecessor programs is to give public money to businesses to do something they would not otherwise do: create jobs in Vermont. And compared to other places in the country, Vermont has worked to improve this program by making it more transparent and by more closely tying payments to results.  I think the Legislature and the administration should be congratulated for those efforts.

But making the program as good as it can be is not the same as a making the best use of public monies.

Stepping back for a minute—jobs are created by the private sector when there is a demand for goods or services, not because the state paid a business to hire someone.  An incentive of a few thousand dollars is not enough to justify spending $40,000, $50,000, or $70,000 on an employee you don’t need. And if a business does need more workers to meet increased demand, it doesn’t need the incentive.

In theory the “but for” provision in the program is supposed to address this.  There must be a finding that “but for” the incentive, the desired hiring would not have happened here. But as the agency’s report states: “There is no way around the fact that the But For is a subjective determination.”  In other words, no one can prove or disprove that the jobs would or would not have been created here without the incentive; at least not in individual cases.

But this is where broader research is useful because researchers can look at lot of cases to make an assessment. Economist Jeffrey Thompson at the University of Massachusetts wrote a report in August 2010 called “Prioritizing Approaches to Economic Development in New England” that discusses this issue.  I’ve handed out a brief summary of this paper.  The entire paper is available on our website and is worth reading.

In it, he points out that there has been a lot of work done all over the country to get at the question of whether incentives make any difference. He cites Economist Tim Bartik at the Upjohn Institute in Michigan whose survey of the literature on business incentives concluded: “in only 3.7% of the cases is the subsidy needed, and in the other 96.3% of cases, the subsidy simply benefits the subsidized business with no economic development benefits for the state economy.”  I don’t think the agency has persuasively made the case that Vermonters’ money spent on the VEGI program is doing anything but increasing the subsidized businesses’ bottom lines.

Thompson also points out that usually many of the new jobs don’t go to people from the target area, but to people who move in to take a job.  To the extent this is true in Vermont, it means that these programs would not be helping unemployed Vermonters.  I don’t know to what extent that’s happening with this program, and I didn’t see a discussion in the agency’s report about how many current residents are being hired as a result of this subsidy.

How are we doing?

There has been a lot of discussion about the details of the program over the years, and whether or not it’s working.  But I think the real questions we need to ask are How is Vermont doing? What’s happening to Vermonters?

In the end, that’s what we’re interested in.  Our recent report: Vermont’s Middle Class: the Facts points to several indicators that show that things have not been going well for many Vermonters.  I’ve included a copy of this two-page report in the materials I’ve handed out today.

Income disparity between those at the top and everyone else has been getting worse, most Vermonters have not shared in the state’s economic growth, and this past decade was the worst on record for job growth—even before the start of the recession.  Vermont has fewer jobs today than it did a decade ago.  Costs for essentials like college and health care have been rising sharply even as Vermonters’ incomes have stagnated, and 15,000 more Vermonters slipped into poverty in the past decade.

These are things we need to be monitoring to determine whether Vermont’s policies are succeeding in making life better for Vermonters. We’ve been doing some form of economic development incentives, just as most states have, for decades.  They have not and are not making Vermont a better place to live for most Vermonters.  So the question is, how do we do some real economic development that Vermonters can actually get a piece of?

An alternative approach.

I’d suggest we follow Jeff Thompson’s advice, who like many economists around the country, think we need to invest in infrastructure and education to turn things around.

Why invest in infrastructure and education?  Because both provide the immediate stimulative effect of creating jobs, and they both add to the foundation of sound and widely shared prosperity.  The result of these kinds of investments will be around and useful to everyone in our society for decades: railroads, bridges, broadband, energy efficient buildings, and education, which is the foundation of innovation.

Public money spent on incentives does not create anything lasting for society.  When a recession hits, jobs created a few years earlier can disappear.  Education and infrastructure improvements are much more durable investments through good times and bad.

In closing, I’d like to read from Jeff Thompson’s conclusion in the brief I handed around.

He says: “State policymakers will continue to face pressure to create jobs in New England for several more years. The available evidence suggests that the most effective approaches are to improve the region’s schools and infrastructure. Instead of trying to lure firms with deals and lower corporate taxes, an approach to economic development that builds the skills of the current and future workforce, improves the physical infrastructure of regions, and makes communities more attractive places for families and firms represents a more effective use of a state’s scarce resources.”

Thank you for inviting me to testify today.

And he is correct in making job creation the state’s top priority and in recognizing that investment now in education and public infrastructure are key to Vermont’s economic future.

We disagree with his comments about taxes, however.  Vermont is not a high-tax state: a typical Vermonter would pay higher taxes in about half of the other states. There is no evidence that lower taxes create jobs: between 2000 and 2010, despite the Bush tax cuts that saved hundreds of millions of dollars in federal taxes for the so-called “job creators,” the state had the worst decade for job growth on record.  And finally, several studies in the past year have shown that increases in tax rates have little impact on individuals’ decisions about where to locate.

We typically think of a middle-class family as owning a home, having health insurance, a decent car, and a college degree (or aspiring for their children to gain one), and earning a reliable income that’s good enough to support a yearly vacation and a secure retirement. Polls tell us that most people consider themselves middle class.

A large middle class is evidence that the wealth in society is shared by a broad base of citizens. It’s an indication that a majority have hope for the future—their own and their children’s. 

This issue brief shows that Vermont’s middle class is slipping. This slippage is not an accident; it’s the result of state and federal policies over the last several decades. And these policies can be reversed to help rebuild Vermont’s middle class. 

Increased income inequality
Occupy Wall Street protests have focused public attention on growing inequality: a greater portion of the economic pie is now going to the top 1 percent, while the remaining 99 percent hold on to a dwindling slice. The pattern in Vermont has paralleled the national trend of the last 30 years. While the share of total income going to Vermont’s top 1 percent declined following the Great Depression, reaching a low of 5.9 percent in 1981, its share rose to 19.1 percent by 2005—more than tripling in 24 years.

Gains not trickling down
From 1990 to 2010, Vermont’s economy saw respectable growth, almost as good as the nation’s as a whole. Real gross state product (after adjusting for inflation) grew 56 percent; national growth was 61 percent. During the same period, Vermont’s real personal income rose 64 percent. However, inflation-adjusted income for the median Vermont household—half the households make more and half make less—rose just 1.5 percent over those 20 years.

Anemic job creation
A decent job has long been the route to the middle class, but Vermont has not created any net jobs in the past decade. Even before the start of the Great Recession in 2007, Vermont was creating jobs at the slowest rate since records have been kept. By 2010, Vermont was seeing a net loss of jobs. This poor showing occurred in a decade when the wealthiest Vermonters—the so-called “job creators”—saved hundreds of millions in federal taxes thanks to the Bush tax cuts.

Higher-cost higher education
A college education is key to a decent income and provides another entrée to the middle class. But while median household incomes have stagnated—even fallen by some measures—college costs have grown at more than twice the rate of inflation. The result is that the cost of college now takes a bigger bite of the income of the median household, making college unaffordable for more Vermonters.

Rising health insurance premiums
Access to doctors, hospitals, prescription medicines, and other care is a life essential. But rising health care costs and Medicaid cutbacks have driven up health insurance premiums and squeezed the middle class. Between 2003 and 2009, Vermont employees’ share of health insurance premiums rose 54 to 88 percent, depending on the type of plan. Premiums rose even though average deductibles more than doubled during the same period.

Download the issue brief in PDF

© 2012 by Public Assets Institute

This research was funded in part by the Annie E. Casey Foundation. We thank it for its support but acknowledge that the findings presented in this report are those of the Public Assets Institute and do not necessarily reflect the opinions of the foundation.

By Jack Hoffman & Paul Cillo

Download this report in PDF

Three years after the start of the Great Recession, Vermont was faring better than many other states.¹ Its annual unemployment rate for 2010 was one of the lowest in New England and lower than in most other states.² The under-employment rate, which includes people who would like to be working more hours, was also among the lowest in the country. The percentage of non-farm jobs that Vermont lost between 2007 and 2010 was the second lowest in New England and 15th lowest nationwide. And the wage gap between male and female workers in Vermont was the smallest in New England and fifth smallest overall (Table 1).

That’s the good news—if we just want to know how Vermont workers are faring relative to workers in other states. But if the goal as a state is to improve Vermonters’ lives and give them hope for the future, it’s not terribly useful to know that things are worse elsewhere.

The bad news is what’s happened to working Vermonters over the last 20 or 30 years. The gap between the rich and everyone else—brought to dramatic light this year by the Occupy Wall Street movement—is widening in Vermont as it is nationwide. The real earnings of middle-income Vermonters weren’t much higher in 2010 than they were in 1990. And Vermont’s private sector is no longer creating new jobs at a rate sufficient to keep up with population growth. The number of Vermonters living in poverty is increasing. And we’re losing what we knew to be our middle class. This adds up to a society that works for only the few at the top.

Peter Shumlin, who won the governor’s office at the end of 2010, campaigned on a promise to rebuild Vermont’s middle class. He described Vermonters who were “fearful that they cannot send their kids to college; that they cannot pay their mortgage; that they cannot retire as they had hoped; that their dreams in Vermont to succeed may not happen in the way that they had hoped.”³

Too many working Vermonters have lost ground in the past 30 years because of state and federal policies that favor the wealthy and put money considerations ahead of people’s needs—profits ahead of job creation, low taxes at the expense of adequate public services, and weak regulation in place of sound public interest protections. It should come as no surprise that these policies have resulted in social and economic ills. It will take the focused attention and commitment of elected officials to reverse these policies—to put people first again and rebuild a vibrant society.

This report seeks to provide an understanding of where working Vermont stood at the close of 2010. It also helps explain how we got here, by putting this first decade of the 21st century into historical context.

Employment and Jobs

Many Vermonters lost jobs during the recession and many are still out of work. In December 2007, at the official start of the recession, Vermont reported 14,420 unemployed workers.⁴ Unemployment peaked in May 2009 at 26,397—an increase of 83 percent. During 2010, an average of 22,470 Vermonters were unemployed—60 percent more than before the recession began.

Joblessness worse than it looks
Vermont’s official unemployment rate in 2010 was 6.2 percent. But this rate doesn’t count people who had gotten discouraged and stopped looking for work. Vermont’s unemployment rate including discouraged workers and those who are under-employed was twice the official rate—12.5 percent.⁵

As bad as that was for Vermonters, they fared a lot better than workers in most other states (Figure 1). Vermont’s 60 percent increase in unemployment between 2007 and 2010 was the fifth-lowest growth rate in the country and the lowest in New England (New Hampshire’s rose 72 percent).

Fewer new jobs even before the recession
By the end of 2010, Vermont still had not recovered the jobs lost during the recession, which officially ended in June 2009. Vermont averaged 297,500 non-farm payroll jobs in 2010, a decline of 3.5 percent from before the recession. That was better than most of the other New England states. Only Massachusetts had a smaller job deficit in 2010; it was down 2.9 percent from its pre-recession level.

All in all, though, 2000-2010 was a dismal decade. Vermont was one of 28 states that had fewer jobs in 2010 than it had a decade earlier. The rate at which Vermont created new jobs during the decade was the slowest since the 1940s, the first decade on record (Figure 2). Even before the recession hit in 2007, Vermont’s pace of job creation was slower than during any of the previous six decades.

Less manufacturing, more health and education services
The biggest job loss in the last decade, in both percentage and number, was in manufacturing—traditionally the sector with some of the best wages. Vermont had a third fewer manufacturing jobs in 2010 than in 2000, and that didn’t include any adjustment for population. Vermont manufacturers employed more than 46,000 people in 2000; by 2010, the number fell to 31,000. Manufacturing accounted for 17 percent of the jobs in Vermont in 1990, and just 10 percent in 2010 (Figure 3).

The manufacturing sector has been shrinking in the U.S. for at least two decades, although Vermont bucked the trend in the 1990s, when manufacturing jobs here increased by 8 percent. From 2000 to 2010 the drop grew even steeper nationally. All but one state lost manufacturing sector jobs. Vermont’s 33 percent decline in manufacturing jobs that decade was the same as the U.S. decline overall.

The biggest sector for job growth—in the past decade as well as in the 1990s—was education and health services, which includes health care workers as well as non-medical workers who provide “social assistance” services.⁶ Education services in this sector include training programs, but not public schools. Jobs in health care and social assistance services nearly doubled in 20 years—from 25,000 in 1990 to more than 46,000 in 2010. Even during the decade ending in 2010, despite the recession, this sector added more than 12,000 jobs. Historically, most of the new jobs in the education and health services sector have been social assistance jobs, which pay the lowest wages of any jobs in this sector.⁷

In essence, over the past two decades, Vermont has seen the steady loss of higher-paying manufacturing jobs and gains in lower-paying service jobs. This means that to maintain its previous level of income, a family would need to work more than one job or reduce spending. Either way, many Vermonters are seeing a reduced standard of living.

Workforce

Vermont continues to have an older and better-educated workforce than many other states. Seven in 10 Vermonters were in the labor force, including those who are employed and unemployed, and 66 percent of Vermont’s population was working in 2010.

Older, more experienced workers
Half of all Vermonters 55 and older were in the workforce in 2010, which was the highest participation rate for that age group in the country (Table 2). These older workers accounted for a quarter of Vermont’s labor pool, which made Vermont’s the greyest workforce in the U.S. for the fourth year in a row.

Some worry about the aging of Vermont’s workforce, citing statistics about the needs of the elderly for more health care and other state-funded services. But in fact older workers offer the economy many benefits.

“While I feel sorry for every American who … wants to retire but can’t, there is a lot to like in this surge of experienced workers,” Harvard economics professor Edward L. Glaeser wrote recently in the New York Times. “Longer work lives mean more tax dollars, and that helps with America’s fiscal problems. Older workers also bring a diversity of perspectives and experience to the workforce.” Noting that “the mid-20th-century retirement boom seems like something of an aberration” historically, Glaeser added: “While some older workers will have to work because they can’t afford not to, there remains the sunny possibility that others … will do so because they find fulfillment in their jobs.”⁸

Better educated, at least nationally
Vermont traditionally has a better-educated workforce than most states. Since 1999, it has been among the top 10 states in the percentage of college graduates in the workforce.⁹ For the last six years, a third of Vermont’s workforce has held at least a bachelor’s degree (Figure 4).

While the education level of Vermont’s 25-to-34-year-olds is good by U.S. standards, the U.S. lags internationally, according to the College Board Advocacy and Policy Center.¹⁰ By the Center’s measure, Vermont would rank eighth internationally, behind Korea, Canada, the Russian Federation, Japan, New Zealand, Norway, and Ireland. Other countries, especially developing countries, are making investments to raise the education level of their younger workers.

To make the U.S. more competitive economically, President Obama has set a national goal of a 60 percent college graduation rate by 2020. The College Board center has a somewhat less ambitious—some would say more realistic—goal of 55 percent of 25-to-34-year-olds attaining associates’ degrees or higher by 2025. Forty-four percent of Vermonters from 25 to 34 had reached that educational level in 2009.

Wages and income

One bright spot in 2010 appeared to be the narrowing wage gap between men and women in Vermont. The gap in real median wages did close—from a male advantage of 16 percent in 2009 to 12 percent in 2010. But the spot wasn’t really so bright. Women’s wages did not rise; they just fell less than men’s. The real median wage for women dropped 0.5 percent in 2010, to $15.27 an hour, while the real median wage for men fell nearly 5 percent, to $17.37 an hour.

The median wage is right in the middle of the wage scale—half of the workers in the group make more than the median and half make less. But it wasn’t just this middle wage that fell in 2010. Wages at nearly all wage levels declined that year. Only those at the top saw their real wages rise (Figure 5).

While this latest drop can be attributed to the recent global economic collapse, typical Vermonters have experienced income stagnation in recent decades. The same has happened in households across the country, fueling the income inequality that ignited the Occupy movement.

Vermont saw strong growth in household income in the 1980s (Figure 6). Real median household income—that is, after adjusting for inflation—rose almost 23 percent between 1980 and 1990, which was the sixth-highest rise in the country. But that was the only decade in the last four that Vermont saw such growth of median household income.

Income disparity and poverty

In the last 20 years—1990 to 2010—inflation-adjusted median income rose less than 2 percent. That was 2 percent for the entire period—not 2 percent per year. Meanwhile, over the same 20 years, the combined real personal income of all Vermonters increased 63.6 percent, and the overall state economy grew 56 percent (Figure 7). In other words, Vermont’s income grew—but most Vermonters’ didn’t.

While the richest Vermonters gained a bigger share of the economic pie, more than 70,000 Vermonters lived at or below the poverty level in 2010.¹¹ Vermont’s poverty rate had been steadily dropping over the past several decades, but it was up again in 2010 (Figure 8). More than 15,000 Vermonters drifted into poverty over the last decade.

Historical patterns
Historically, Vermont’s pattern of relative income equality mirrors what has happened nationally, according to research by Sam Houston State University economist Mark W. Frank. Frank used IRS data going back to 1916 to calculate the share of income going to the top 10 percent and the top 1 percent of taxpayers in each state.¹²

A wide gap between rich and poor persisted through the 1920s, but after the Great Depression the disparity began to decrease. For almost 50 years, from 1930 until the late 1970s, the gap steadily narrowed. During that time, union membership rose, taxes on the wealthy increased, and new banking regulations curbed the kind of financial speculation that contributed to the Crash of 1929 and the Depression.

For the last 30 years, however, the gap between the rich and everyone else has widened again. In the late 1920s, 14 percent of Vermont’s income went to the top 1 percent of taxpayers. That share reached a low of 6 percent in 1981, before income disparity began to grow again. By 2005, the latest year for which we have Vermont-specific data, the share of income received by the top 1 percent of Vermont taxpayers had climbed to 19 percent—more than tripling in 24 years (Figure 9). Meanwhile, the share of income for the bottom 99 percent shrank from 94 percent in 1981 to 81 percent in 2005.

A Vermont that works for everybody

The first step to moving Vermont in a new direction is acknowledging the problems we face—and face what those problems say about us.

Governor Shumlin identified an important part of the problem when he described the fears of many middle-class Vermonters who don’t see their lives getting better. The commitment to rebuild the middle class is a good place to start, but Vermont’s problems go beyond the middle class. Income disparity is growing. Do we want to be a state where a few continue to amass greater wealth while tens of thousands live in poverty? Continued rhetoric about the benefit to all of making Vermont more attractive to the wealthy—the approach that got us to this place—will not suffice. To reduce poverty and income inequality, the state needs to make real investments that benefit all Vermonters.

Such investments will also enhance Vermont’s economic position. For instance, if Vermont wants to be competitive in the nation and the world, it will need to invest more in higher education, while maintaining its investment in pre-K through grade 12.¹³Indeed, our per-pupil education spending is already high relative to other states. But other states, and the U.S. as a whole, lag behind much of the developed world. Simply aiming to top the list in the U.S. will not make Vermont a world-class educator.

Aiming for increased total wealth or a “better economy” is not enough. The goal should be a state that works for all Vermonters. Our political leaders can take steps right now to move toward that goal.

Adopt policies explicitly aimed at improving the lives of all Vermonters.
For example, if the Legislature wants to rebuild the middle class, then rebuilding the middle class should be a policy objective, and major legislation should be judged against that goal. When the governor presents his budget or a committee proposes new tax changes or economic development plans, the proposals should be measured by how much they will help or hurt the middle class.

In recent years, we have seen proposals to reduce eligibility for paying school taxes based on income, an option available to most resident homeowners under Vermont’s school funding law. Such a change would increase taxes on middle-income Vermonters and lower taxes for second-home owners and for those in the highest income brackets. It would not advance the objective of strengthening the middle class, and it would not serve to narrow the gap between rich and poor—another policy goal Vermont should adopt.

Develop easily understood indicators that show whether Vermont is moving toward its new goals.
The Agency of Human Services used to collect data and publicize a set of indicators that measured Vermonters’ wellbeing. The indicators included things like school graduation and dropout rates, teen pregnancy, college enrollment, drinking and drug use, poverty, and employment. The administration and Legislature should resurrect those Human Services indicators and develop others for other areas of state government.

For example, the Department of Economic Development could use median household income as one of the indicators of whether its economic development efforts are working. Instead of focusing on the amount of tax credits awarded to businesses, the department should be looking at whether all Vermonters are sharing in the state’s economic growth.

Part of the stated mission of the Department of Economic Development is “to enhance Vermonters’ quality of life through expanded economic opportunity.” We need indicators that clearly show whether Vermonters’ quality of life is improving, and then measure the department’s initiatives in terms of contributions toward that goal.

The Legislature tried to move toward this results-based approach with the Challenges for Change program in 2010. The program was supposed to save money while maintaining or even improving the delivery of public services through greater efficiency. But Challenges for Change became a pretext for more budget cuts, and, rightly, was abandoned.

Create tools and restore the capacity to measure the effectiveness of public programs and services.
One problem Challenges for Challenge revealed was that recent budget cuts and staff reductions have diminished state government’s ability to collect and analyze information about its own performance. We need to rebuild that capacity, which means the governor’s administration and the Legislature need to invest more money to improve the government’s efficiency and effectiveness before it can ultimately save some money.

Vermont also needs better tools to measure effectiveness: what works and what doesn’t—or which programs or services produce the best results for the dollars spent.

The Legislature is exploring a new system that could help. Results First, developed by the Pew Center for the States, measures the return on investment—that is, the cost effectiveness—of public programs by calculating the benefits of things like reduced crime or higher graduation rates and comparing them to program costs. The state also is investing in a computer upgrade that is supposed to make it easier to track each program’s costs.

The spirit of Irene

In late August, after the period covered by this report, Tropical Storm Irene hammered Vermont. Responding to the worse disaster to hit the state since the 1927 flood, Vermont showed a unity of purpose and commitment to do what needed to be done that was refreshing in this era of political and cultural polarization. Unlike this summer’s floods, though, our current economic problems didn’t just happen. They are the result of policies adopted over the last 30 years. We can choose different policies that will move us in a better direction. We can hold onto that post-Irene spirit and rebuild the hopes that many Vermonters have lost over the last 30 years.

© 2011 by Public Assets Institute

This research was funded in part by the Annie E. Casey Foundation. We thank it for its support but acknowledge that the findings presented in this report are those of the Public Assets Institute and do not necessarily reflect the opinions of the foundation.

1. Rankings in this report exclude the District of Columbia.
2. Vermont’s unemployment rate is typically below the national average.
3. Vermont Public Radio, “Governor-elect Vows To Focus On Creating Jobs,” Nov. 3, 2011, http://www.vpr.net/flash/audio_player/audio_player.php?id=32209
4.  Jobs and employment figures for specific months in this report are seasonally adjusted; annual averages are not seasonally adjusted.
5. Vermont Department of Labor, Alternative Unemployment Rates, U-6, http://www.vtlmi.info/unempaltrate.cfm
6. Detailed descriptions of industries in the North American Industry Classification System (NAICS) can be found at the U.S. Bureau of Labor Statistics, http://www.bls.gov/iag/
7. Paul Cillo and Doug Hoffer, “State of Working Vermont 2007,” Fall 2007, Figure 5, http://publicassets.org/wp-content/uploads/2008/05/pai-ib0701.pdf
8. Edward L. Glaeser, “Goodbye, Golden Years,” New York Times, Nov. 19, 2011, http://www.wehaitians.com/goodbye,%20golden%20years.html
9. Ranking does not include District of Columbia, which always has a higher percentage of college graduates than any of the states.
10. A study by the College Board Advocacy and Policy Center ranks the U.S. 11th among 24 countries in the education level of 25-to-34-year-olds. See “The College Completion Agenda,” http://completionagenda.collegeboard.org/
11. Research shows a link between the rich getting richer and the poor getting poorer. See Public Assets blog, “A Bigger Pie Doesn’t Mean a Bigger Slice for All,” http://publicassets.org/blog/a-bigger-pie-doesn%E2%80%99t-mean-a-bigger-slice-for-all/; and Jeffrey Thompson and Elias Light, “Searching for the Supposed Benefits of Higher Inequality: Impacts of Rising Top Shares on the Standard of Living of Low- and Moderate-Income Families,” April 2011, http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_251-300/WP258.pdf
12. Mark W. Frank, “U.S. State-Level Income Inequality Data,” Department of Economics and International Business, Sam Houston State University, http://www.shsu.edu/~eco_mwf/inequality.html
13. For research on long-term economic benefits of education, including early childhood education, see the work of Timothy Bartik, W.E. Upjohn Institute for Employment Research, http://www.upjohninstitute.org/Research/EducationandTraining/K12

– Vermont’s 99 Percent
– After the Deluge, Fresh Thinking
– Hogan Joins Health Care Board
– The Middle Falls Further Behind
– Jobs, Jobs, Who’ll Create the Jobs?

Continue reading October 2011 Update

His point, which he laid out in a blog post a few weeks earlier, was that business views jobs as a necessary evil, a cost that reduces profits, not as a social responsibility.

It isn’t news that the goal of business is to make a profit, or that cutting costs helps do it, but the stark truth of Frezza’s statements may help to explain why prosperity isn’t reaching middle class Vermonters.

Over the 20 years from 1989 to 2009, while Vermont’s overall economy (income and gross state product) grew about 60 percent in real (inflation-adjusted) dollars, real median household income grew only 2 percent.  In essence, average Vermonters did not get ahead despite plenty of economic growth.

Business job- and cost-cutting strategies over those 20 years included new computer technology and offshoring–the practice of having manufacturing or services done less expensively overseas.  These strategies cut costs and boost profits, but they also boost unemployment.

While it’s not business’ fault, the fact remains that unemployment is a social ill.  People without jobs don’t have a productive role in society and don’t have the means to live.  So if it’s not the responsibility of the private sector to create jobs, whose responsibility is it?  The answer has to be the public sector.

But state government, chided to operate more like a business, has been cutting jobs, too.  So how does all this job cutting create jobs?  It doesn’t.

If the state wants to create jobs, it should take two steps based on the analysis in PERI economist Jeff Thompson’s August 2010 paper:

•  Reduce public money give-aways to business that supposedly create jobs.  Estimated at over $300 million each year in Vermont, these funds do little to create jobs; they simply increase profits for the lucky businesses.

•  Increase investment of public funds in public infrastructure and citizen education– both have the short-term benefit of job creation and both provide a solid foundation for the state’s economic future.

This simple shift in the use of existing public funds would have a profound impact on job creation and begin to restore Vermont’s middle class.

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Help Needed to Fill the Fridge
Officially, the recession ended more than two years ago. But Vermonters still struggle to put food on the table. Before the start of the recession, about 52,000 Vermonters received food stamps each month through 3SquaresVT. During fiscal 2011, which ended in June, food stamp recipients averaged about 90,000 a month. Since the official end of the recession, with thousands of Vermonters still out of work, demand for food stamps has increased 36 percent.

Multiple Jobs = One Livelihood
For at least 10 years, Vermont has led the New England states in the percentage of workers with more than one job, which might explain the state’s relatively low unemployment rate. The number of Vermonters with multiple jobs declined during the recession, from 32,000 in 2007 to 27,000 in 2009. If those 5,000 people had become unemployed instead of going to just one job, Vermont’s 2009 unemployment rate would have been 8.3 percent, not 6.9 percent—and much closer to the national average.

Download the Jobs Brief in PDF to read more.