Despite receiving large corporate “welfare checks” to spur job growth in manufacturing and technology, the Philadelphia region still lags behind other areas of the Commonwealth in employment.
The region has received more than $300 million in taxpayer subsidies in the past three years – the most of any Pennsylvania region – according to a report by the Allegheny Institute. But this job-creating money, $236 million of which went to the city, failed to help create or retain the tens of thousands of jobs for which it was intended.
According to the U.S. Bureau of Labor Statistics, from February 2005 to February 2006, the region – the city and its four suburban counties – had 1.1 percent job growth, about 45 percent below the national growth rate. This was among the slowest in Pennsylvania, along with places such as Pittsburgh, Erie and Williamsport. Allentown and the State College area had the highest growth with 2.1 percent.
Of course, any job growth in the Philadelphia area is an improvement; from February 2003 to February 2005, employment in the region grew by a minuscule 0.4 percent. However, the city of Philadelphia has lost 18,000 jobs (down to 662,600 jobs) since February 2003, Gov. Rendell’s first full month in office.
Total nonfarm employment in the region increased by 20,900 over the latest one-year period. This was fueled primarily by increases in three sectors: private-sector education and health services; professional and business services (such as accountants, lawyers and consultants); and wholesale trade (merchandise or raw materials sold to other businesses). Combined, they account for more than 14,900 jobs the region gained.
Manufacturing jobs continue to decline here. In February, there were 4,100 fewer jobs than in 2005. Overall, there are now 19,700 fewer manufacturing jobs than in February 2003.
The information technology sector (publishing, software design, Internet, etc.) remained stagnant, with no change in employment in the past year. This followed a loss of 10,000 jobs in the region in the previous two years, the fallout of Internet companies going bankrupt.
Growing faster than the Philadelphia region is the Wilmington area, located just minutes from Chester and Delaware Counties. It experienced a job growth rate of 1.6 percent from 2005 to 2006, 40 percent higher than the Philadelphia area. Wilmington competes directly with communities across the Pennsylvania border for jobs and residents’ dollars, and it attracts tourists and other visitors from Philadelphia.
Why has Wilmington been so successful in job creation? For starters, Delaware has a lower corporate income tax than Pennsylvania, encouraging businesses, such as AAA Mid-Atlantic, to move there. Likewise, Delaware has no state sales tax, so goods sold by Wilmington businesses cost less than those same goods in Pennsylvania – giving business a decided advantage in attracting customers. Businesses moving to Wilmington also avoid Pennsylvania’s burdensome corporate stock and franchise tax, a tax on business property and assets, and higher mandated unemployment compensation payments.
With the Philadelphia region’s economy still slumping despite Harrisburg’s failed policy of augmenting the bottom lines of big corporations with taxpayer subsidies, it is time for a new approach. We just need to look south along the Delaware River to see that corporate welfare is unnecessary for job growth.
Maintaining high business taxes to fund grants for a select few corporations will not attract many new companies to Pennsylvania – with the exception of those receiving corporate welfare. Reducing the tax and regulatory burden on all businesses is the only way to grow the Philadelphia region’s economy. Its job market cannot improve if it continues to depend on taxpayer-funded gifts from Harrisburg.
# # #
Nathan A. Benefield is a policy analyst with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.