Facing reality a necessary step toward fiscal stability
The jobs have started to come back, but not the wages.
That was one of the points Office of Policy and Management Secretary Ben Barnes sought to drive home in briefing the press on the governor's budget proposal last week. Weak wage growth equals reduced tax revenues, which is why Connecticut state government has to learn to do with less.
Emphasizing a lack of wage growth is usually not a priority for an administration. A Democratic governor doing so to make a case for cutting state spending may be odder still. Yet Gov. Dannel P. Malloy is convinced that is the hammer he needs to finally force the legislature to pass budgets that are fiscally sustainable.
In the pre-Great Recession years of 2004-2008, employment in the state grew by 3.8 percent, while wages increased 16.9 percent. With tax revenues rolling in, it was an opportunity to close the gap in the state’s underfunded pension plan or invest in its crumbling transportation system. Instead the elected leaders opted to expand government operations and expenses at a growth rate of 6.6 percent annually.
In the wake of the Great Recession the state and nation have faced a new reality. From 2011-2015 the growth in employment has returned to nearly pre-recession levels, 3.7 percent. But wages have increased over the same period by a feeble 5.6 percent.
The toll of the Great Recession was certainly great in Connecticut. From March 2008 to February 2010, Connecticut lost 54,000 high-wage jobs paying more than $80,000 annually, 25,000 mid-wage jobs paying $50,000 to $80,000, and 40,000 jobs paying less than $50,000. The hardest hit segment of the state workforce, therefore, were those in higher paying jobs.
Equally alarming is that the higher paying jobs have seen the weakest recovery.
From February 2010 through 2015, Connecticut recovered only 8,200 of those higher paying jobs, while mid-wage jobs grew by 37,000. Jobs in lower-wage industries saw the greatest growth, adding 61,500 positions post-recession.
That is not the job growth Connecticut needs and it is why Malloy is right that state spending has to adjust to the new reality of what its workforce can afford. Higher taxes are not the answer to balance the budget because citizens cannot afford them. And if businesses are to expand and boost wages, they can't be confronted with ever-higher taxes.
But is the displacement of well-paying jobs with low-wage jobs a condemnation of Malloy’s leadership, now in year two of a second term?
In an interview with Editorial Page Editor Paul Choiniere, Malloy rejected that notion.
“It's not just Connecticut. It's the national economy. It's what's created the angst behind Trump and Bernie (Sanders), honestly. We may be a little further one way than another way, but not a whole lot. That's what they're talking about. That's what Trump is talking about, that's what Bernie's talking about,” said Malloy of the anemic wage growth and movement to lower-paying jobs.
Malloy made a valid point in noting that the recovery from the Great Depression was particularly long and arduous and that the public should not be shocked that recovering from the Great Recession has also proved difficult.
The governor, however, cannot escape full responsibility. His earlier budget repairs depended too much on higher taxes, not enough on making government more affordable. Other states faced the same realities and adjusted sooner.
Malloy conceded that his toughest selling job will be within his own Democratic Party.
“I think if I can convince enough people that it's changed — and clearly, the Democrats … if we could have everyone in the state understand that we're like other states … and therefore we have to change how we think about government and its role, then we'll be OK.
"(So) what's the big message? The message is, it's changed," said the governor.
Indeed it has and, so too, must state government.
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