Chamber wants Illinois to become Mississippi
By David Green
State-level "business climate" generally refers to regulations imposed by states beyond what is required by the federal government. (This definition generously excludes consideration of the willingness of state governments to bribe corporations not to relocate to other states).
In its 2011 report "The Impact of State Employment Policies on Job Growth: A 50-State Review," the U.S. Chamber of Commerce concluded: "States with the heaviest regulatory burdens are sacrificing opportunities to reduce their unemployment rate and generate new business startups. In fact, if each state were to get a 'perfect' score on the Economic Regulation Index (ERI), the effect would be equivalent to creating a one-time boost of approximately 746,000 net new jobs nationwide."
It should be duly noted that a good climate for business and higher employment is axiomatically defined as a bad climate for worker rights and the good jobs that are consistent with legislated respect for those rights.
The ERI includes 34 characteristics in areas such as minimum and living wage, unemployment insurance and workers compensation, wage and hour policies, collective bargaining, litigation enforcement climate, and "employment relationships and the costs of separation." The Chamber's study rates the 50 states on their employment policies and places them in three Tiers: Tier 1, Good, 15 states, total population 105 million including Texas, Florida and seven other Southern states; Tier 2, Fair, 20 states, total population 73 million including most Midwestern states other than Illinois, Michigan and Wisconsin; Tier 3, Poor, 15 states, total population 135 million including Illinois, California, New York, Pennsylvania and most other "blue" ("liberal") states.
Ross Eisenbrey of the Economic Policy Institute has noted that not only did the Chamber employ a "faulty regression analysis," but it also "mischaracterizes" many of the variables included in its Employment Regulation Index. More fundamentally, Eisenbrey stated a year ago: "That corporate America's bottom line is doing extraordinarily well should, at a minimum, make one skeptical of the seemingly endless studies by business groups which somehow find that regulations are damaging them."
Eisenbrey concluded: "Given that the U.S. has one of the most welcoming regulatory environments in the world, why aren't U.S. businesses creating more jobs instead of hoarding the historic profits they've accumulated? The answer, as most economists know, is slack demand. Without customers able and willing to spend, businesses won't invest. The solution is the same as it was at the start of the recession: because financially squeezed consumers can't spend and businesses won't, it is the responsibility of the federal government to make large enough investments in infrastructure and human capital to lift the economy and protect our future prosperity."
More to the point, even if the figure of 746,000 is taken at face value, it constitutes a small percentage of the 10 to 15 million jobs needed to approach full employment. Moreover, there is no evidence that corporate and financial decision-makers want the tight labor market that full employment brings, which leads to worker demands for better pay and working conditions, and may result in lower corporate profits. The richest 1 percent of households has gained at least $6.1 trillion in wealth since 2008; that's over $5 million for each of 1.2 million households, who are obviously doing fine with high levels of overall unemployment and stagnant wages — indeed, because of those factors.
It's important to stress how ludicrous it is for the Chamber of Commerce to claim that state-level regulatory environments affect unemployment levels in any significant and meaningful way. The best way to gauge employment is by calculating the ratio of employment to population, and to track that over time. This accounts not only for official unemployment, but also for "discouraged workers."
At a national level, in January 2000 (toward the end of the stock market bubble) that ratio was over 46 percent; by January 2012 (after the bursting of both the stock market and housing bubbles and a slow recovery) it was below 43 percent. That accounts for over 10 million disappeared jobs that have nothing to do with state-level regulation, and everything to do with Wall Street and financial deregulation at the federal level.
More specifically, "Tier 1" (low regulation) states collectively saw their employment to population ratio fall from 45.7 percent to 41.6 percent during this 12-year period; "Tier 2" (medium regulation) states from 47.6 percent to 44.4 percent; "Tier 3" (high regulation) from 45.9 percent to 42.9 percent. States with more legislated protections for workers saw employment drop marginally less during this period. Of the nine states that did not see a decrease in their employment/population ratio, the eight that are not named "New York" have a total population of 6 million. The only "Tier 1" states among those are North and South Dakota.
It is clear that the tsunamis of the national and global economies have swamped almost all of the state employment boats in devastating fashion.
Illinois is, of course, a "Tier 3" state. Between 2000 and 2012, its employment to population ratio went from 48.4 percent to 44.9 percent, a decrease of 3.5 percent. Mississippi is, of course, a "Tier 1" state; its ratio went from 40.7 percent to 37.3 percent, a decrease of 3.4 percent from a lower starting point. If Illinois were currently like Mississippi in terms of its employment/population ratio, another 1 million jobs would disappear. But it's important to stress that "business climate" as measured by the Chamber of Commerce tells us little about the strengths and weaknesses of a state's economy.
It's important for citizens to understand how little the Chamber of Commerce cares about employment levels, working conditions, and the quality of the lives of working families. It's equally important to understand how much lobbying effort the Chamber expends to deprive workers of any semblance of rights, dignity and prosperity.
David Green, who lives in Champaign, is a social policy analyst at the University of Illinois.