Job Crushing

PA economic policies smothering job creation

The annual budget process in Pennsylvania is about to shift into high gear, and it is causing great apprehension among the state’s business owners and employers.

The Lincoln Institute’s recently completed Keystone Business Climate Survey found employers in a dour mood. Forty-nine percent said the commonwealth’s business climate had gotten worse over the past six month. That is the most pessimistic assessment of the Pennsylvania economy rendered by employers since the September of 2001 survey taken immediately after the terrorist attacks. Looking ahead six months, 41% of employers say they expect the state’s business climate to get even worse, while only 15% expect it to improve.

A combination of last year’s increase in the minimum wage coupled with a wide range of proposed tax hikes and new state government spending programs now on the table in Harrisburg are driving employer concerns. Further, there appears to be little confidence in the business community that either the governor or the legislature can or will do anything to make the situation better. Governor Rendell’s job approval rating among the employers surveyed was just 17%, with 78% holding a negative view of his performance in office. Only 18% think the state senate is doing a good job, and just 11% give positive marks to the state house.

The minimum wage hike has had a profoundly negative impact on the state’s job climate. Twenty-five percent of the employers said they are not hiring new employees as a result of the increased minimum wage, 27% say they are now not hiring teens or inexperienced workers. Ten percent of the businesses said they have cancelled or postponed expansion plans; 5% have had to cut their hours of operation to absorb the increased costs.

Against this backdrop employers face the possibility of significant new taxes. Generally speaking 80% say they oppose the governor’s proposed 2007-08 budget – with 61% saying they are strongly opposed. Only 11% offered support for the governor’s spending plan.

Leading the list of gubernatorial initiatives that make employers jittery is the proposed “Prescription for Pennsylvania,” which would be, in effect, a government-run health care program subsidized by additional taxes on employers. Most of those responding to the Lincoln Institute poll said they are familiar with the governor’s plan, and 71% oppose it.

Opposition runs even stronger to Governor Rendell’s call for raising the state sales tax from 6% to 7%. Eighty-two percent of the employers surveyed say they oppose a sales tax increase – 68% say they are strongly opposed.

The governor’s plan to privatize the Pennsylvania Turnpike to pay for needed highway and bridge repairs is the most popular revenue enhancing idea among state employers. Half said the governor should privatize the turnpike, while 22% said they would support higher gasoline taxes to get the roads and bridges fixed.

Another area of concern for employers is property taxes. Seventy-four percent said they have not received, nor do they expect to receive a reduction in property taxes as was promised by the governor in exchange for the legalization of slot machine casinos in the state. In past Keystone Business Climate Surveys owners have identified property taxes as the most unfair of taxes and the most in need of reform. Thus, a failure by the administration to adequately address the issue is contributing to an overall negative view of the state economy.

Why is all this important? Pennsylvania finds itself today in a highly competitive position not only with other states, but we also must compete in a global economy. While the governor touts job growth, he doesn’t mention that relative to growth in other states Pennsylvania continues to fall behind. Worse, for every new job created 2.5 people are being added to the state’s welfare rolls. Clearly the administration’s rent-a-job approach to economic development is being swamped by the tidal wave of high taxes and business crushing policies that added together are suffocating job growth in Penn’s woods.