Say you’re working your way through college, supplementing student loans with a part-time job managing inventory at Wegmans. You make a decent hourly wage, but your health insurance benefits are key, saving you thousands per year in premium costs. Then, one Monday, your boss tells you part-timers are no longer eligible for benefits.
Jim VanBlarcom, a busy Bradford County dairy farmer, set a work day aside to come to Harrisburg and tell his story to Gov. Tom Corbett's Marcellus Shale panel. Royalty money from leasing farmland helped him double his dairy herd size, and he's glad the industry's here.
Penn's Woods are darker and deeper in red ink than ever before thanks to the tax-borrow-and-spend agenda of the Rendell Administration and some General Assembly members who failed to put Pennsylvania back on a path to prosperity. To add insult to injury last month, the U.S. Census Bureau announced that Pennsylvania would lose another Congressional seat in 2012 due to stagnant population growth.
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In 2007, the Philadelphia Youth Network needed to cut 1,100 jobs for inner-city teens. Why? Because they couldn't afford to place as many teens in jobs under the higher minimum wage.
In the end, the organization was able to secure additional funding to maintain job placements, but the experience of Philadelphia Youth Network demonstrates how the minimum wage harms, not helps low-income workers.
Raising the minimum wage is ineffective for two reasons: Most low-income breadwinners do not make the minimum wage and minimum wage hikes actually shrink the number of available jobs.
First of all, the majority of Pennsylvania's minimum and near-minimum wage earners reside in households with an annual income above $40,000 a year. Only 10% of PA min wage earners are single parents who qualify for the federal EITC.
Secondly, minimum wage hikes reduce job opportunities. In 2006, a comprehensive review of more than 100 studies found, in the vast majority of cases, raising the minimum wage increases unemployment for low-wage workers. A 10% increase in a federal or state minimum wage actually decreased employment for black males by 6.5%, according to a 2011 study.
The bottom line is a higher minimum wage makes it harder for employers to offer opportunities to those who need it most.
So how do we help families struggling to make ends meet? A one-percentage point drop in the state's corporate tax rate would increase annual economic growth by 0.1 to 0.2%, leading to higher productivity, which means more jobs and higher wages. Pennsylvania can also scale back professional licensing to give low-wage earners the opportunity to increase their incomes through entrepreneurship.
Advocates for low-wage workers should be pursuing reforms that work, not policies that raise some workers wages at the expense of others.
Pennsylvania’s economy is beginning to recover from the 2007 recession, according to the latest numbers from the Bureau of Labor Statistics.
Since 2010, Pennsylvania has added 86,400 jobs, ranking 21st among states. In contrast, Pennsylvania added just 41,300 jobs from 2002-2010. This lack of job growth can be attributed to a variety of things including national trends; Pennsylvania's tax burden, which is the 10th highest in the nation; and the state's regulatory environment and growth in government spending—issues which lawmakers need to tackle.
While Pennsylvania employment has not returned to its prerecession peak, the state is slowly making progress. Claims of Pennsylvania ranking near the bottom in job creation during the past few years are widespread but misleading. In fact, the state has ranked poorly in job growth for decades.
Policymakers in Harrisburg should consider reforms to encourage job growth. Here are just a few recommendations from our new report, Blueprint for a Prosperous Pennsylvania:
End Corporate Welfare and Lower the Tax Burden: Pennsylvania will spend approximately $1.6 billion on corporate welfare this fiscal year. Instead of handing out loans, tax credits, and special favors to privileged companies, policymakers should end these programs and use the savings to cut Pennsylvania’s corporate tax rate, which is the second highest in the world.
Enact Welfare Reform: Pennsylvania's welfare budget continues to grow at an unsustainable rate. To prevent burdening Pennsylvanians with even higher taxes, policymakers should crackdown on the fraud and waste inherent in welfare programs, and demand flexibility from the federal government to restructure the welfare system’s incentives, which only hurt those trying to escape poverty.
Enact Spending Limits: In order to put Pennsylvania on a sustainable path, lawmakers should adopt fiscal restraints, such as spending limits for core functions of government. The limits would control the growth of government spending by tying increases to inflation and population growth. Had state spending limits been enacted in 2000, taxpayers could have seen savings of $4,000 per family of four.
Pennsylvanians are losing economic freedom according to the Fraser Institute’s annual report, Economic Freedom of North America 2013. The commonwealth is slowly losing ground ranking 33rd in 2009 and dropping to 40th in the latest study.
The index measures the limitations on economic freedom imposed by all levels of government in the 50 U.S. states and 10 Canadian provinces under three broad categories. Pennsylvania performs poorly in each category:
- Size of government: 48th
- Takings and discriminatory wealth redistribution: 34th
- Labor market freedom: 24th
There are several reasons for Pennsylvania’s abysmal performance. Chief among them is Pennsylvania's growing debt and spending, which has created $47 billion in unfunded pension debt and an estimated $1.2 to $1.4 billion budget deficit.
If policymakers want to improve the lives of Pennsylvanians, focus should be on increasing economic freedom and opportunity by enacting pension reform, slowing the growth of overall spending and reducing the size of government.
For more on how to accomplish these goals, check out our newest report: Blueprint for a Prosperous Pennsylvania.
Who are We?
The Commonwealth Foundation is Pennsylvania's free-market think tank. The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.