Pennsylvania is notorious for its bad business climate always ending up near the bottom of every study of competitiveness among the 50 states. But for the first time in years the folks who own and operate businesses in Penn’s Woods say things are improving and they are expressing optimism about the future.
Call it the "Trump bump," a burst of business optimism reflected by the strong bull equities market and the fact that for the first time in years those who invest in creating and expanding businesses think that – at a minimum – the tax and regulatory climate won’t get worse and might actually substantially improve.
The Spring 2017 Keystone Business Climate Survey, a semi-annual poll conducted every year for the past 23 years, found the largest upward tick in the survey’s history. Twenty-seven percent of the respondents said business conditions had improved over the past six months – that’s up from 5% last Fall. Better still, 36% of the owners and CEOs said they expect the business climate to improve over the coming six months.
The major development between the September and March surveys was, of course, the presidential election. Driving the rosy outlook is the prospect of significant reform to the federal tax code – 74% said they are more optimistic given that possibility.
While tax reform and regulatory relief are on the way at the federal level, Pennsylvania still has some serious work to do if it is to position itself to ride the rising tide.
A look around the country finds the growing number of right-to-work states are the ones with the fastest growing economies. Right-to-work means that employees may join a labor union if they want to, but are not required to do so as a condition of employment. That basic reform has triggered an economic resurgence in Wisconsin. Kentucky and Missouri earlier this year joined the ranks of right- to-work states.
"There is no denying that job-creating businesses which pay family sustaining wages consider right-to-work laws a non-negotiable factor in determining which states to locate and which states to leave," said State Representative Daryl Metcalf in unveiling a package of bills designed to improve Pennsylvania’s competitiveness.
The bills, dubbed the Pennsylvania Open Workforce Initiative would restore worker freedom by making all employment in Pennsylvania no longer conditional upon union membership or paying dues to a union. Companion bills would do the same for schools, municipal, county and state government workers. To take the issue permanently off the table a Freedom of Employment Amendment to the state constitution has been proposed.
The American Legislative Exchange Council (ALEC) this month published its annual Rich States, Poor States report. Pennsylvania finished 39th among the 50 states in a ranking that took into consideration a wide range of state level economic policies.
A key factor in that poor rating is that Pennsylvania ranked 50th in worker freedom – dead last – due to the absence of a state right-to-work law. Clearly the state’s restrictive labor climate is causing business to look elsewhere in the country to expand or locate.
The Rich States, Poor States report turned up a couple of other problem areas for the commonwealth. For example, we rank 49th in the country on corporate taxes, meaning only one state in the nation levies a higher corporate net income tax than Pennsylvania.
You can also place some of the blame on our legal system: the Keystone state ranks 37th in terms of judicial impartiality since our courts disproportionally rule against business interests.
With real reform on the horizon at the national level, and Pennsylvania poised to take advantage of a boom in the energy sector, reforms at the state level would supercharge our state’s economy and finally allow us to fully recover from the impact of the Great Recession.
And the beneficiaries won’t just be big business. Thousands of small businesses will be able to grow and expand as well. And, for the average Pennsylvanian, that means more jobs – better and more highly paid jobs – that will provide opportunities for ourselves, for our children and for future generations of Pennsylvanians.
(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected].)
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