Vermont’s economic growth is not widely shared

There should be a bright side to Gov. Peter Shumlin’s frequent complaint that Vermont business owners have difficulty finding skilled workers. When there is work to be done and not enough workers, wages should go up.

That would be a good thing, and something that needs to happen in Vermont.

You wouldn’t know it from recent reporting, but the state’s economy, as measured by the gross state product, has actually been doing relatively well. Despite this economic growth, though, wages have fallen, and there are fewer Vermonters employed now than prior to the start of the recession.

In short, there’s a disconnect between the state’s economic growth and the fact that Vermonters who are contributing to that growth are not sharing in the benefits.

Vermont’s economy has grown at an average annual rate of 2.4 percent after adjusting for inflation since the bottom of the recession in 2009. While not quite at the annual 2.7 percent growth rate of the decade before the recession, Vermont’s is the second fastest growth in New England and slightly better than the national average. In 2013, the latest year available, Vermont had the best growth in the Northeast (11 states plus the District of Columbia).

Despite this growth and the fact that worker productivity has increased, real wages—after adjusting for inflation—have fallen for most workers. The real median wage—half earn more than the median and half earn less—dropped 1 percent between 2009 and 2014. Real wages below the median dropped even more. Meanwhile real wages at the top—at the 90^th percentile—rose 7 percent in the last five years.

The Vermont Department of Labor doesn’t have any detailed information about the unfilled jobs the governor talks about: where they are or how many, what industries or occupations are seeing labor shortages, or how much the jobs pay. The implication from the governor is that Vermont doesn’t have enough workers with adequate training or education. But might these jobs be filled if the employers paid higher wages?

The growing gap between the rich and everyone else is a problem in Vermont, just as it is across the country. The problem isn’t a lack of economic growth; it’s that too few people are benefiting from the growth. The state can’t solve the problem for the entire country, but it ought to take the steps that it can to improve life for Vermonters.

Encouraging employers to pay more is one such step. And if more businesses paid livable wages, that would take pressure off things like the earned income tax credit (EITC), which helps low-income, working families, but is really a subsidy for low-wage employers.

Instead of encouraging businesses to increase wages, however, the administration’s recent proposal is sending the opposite signal. It has proposed changes to a business tax credit program that would lower the hourly wage rate businesses have to pay to qualify for the state tax credits.

We hear a lot these days about affordability from elected officials who want to reform state policies. But the reforms need to ensure that people can share in the benefits of the state’s economic growth. Average Vermonters will find things more affordable when they have more money in their pockets.