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Governor Malloy has declared Connecticut open for business. But many business lobbyists continue to say it’s one of the least business friendly states in the nation. So who’s right? WNPR’s Harriet Jones takes a look at a new analysis of Connecticut’s competitiveness.
This year’s debate over the minimum wage has crystallized a lot of views of Connecticut’s legislature as anti-business.
“When government raises the sales tax or the income tax, they don’t care about the consequences. As a small business owner, where the heck are we going to get the money?”
That’s Mark Bernacki, a small business owner who runs Sir Speedy Printing in New Britain. He was recruited by the National Federation of Independent Business recently to speak out on proposed legislation raising the minimum wage.
“Whether it’s the minimum wage or the unemployment compensation or everything else that the state seems to throw at us, it’s the wrong time to be doing these things. I think you’re getting the frustration from a lot of the small business owners that it’s truly not the time, because you’re losing the entrepreneurial spirit of a lot of people.”
That’s the frequently expressed view of business organizations in the state. Both the NFIB and the CBIA recently cited a study by the Tax Foundation that ranked Connecticut number 40 out of the 50 states for its business tax climate. These claims piqued the interest of one economics professor at UConn.
“Competitiveness is really not a one dimensional thing.”
Dr Francis Ahking decided to go looking for more data to shed light on relative strength of the state’s business climate.
“A company decides to locate in a particular state because of many variables, taxes is one, better labor force and other things. So I was thinking that focusing on just one thing – the high cost of doing business – doesn’t tell the whole story.”
And he says the recent debate over the minimum wage has demonstrated that decision-making on economic issues is too often dominated by politics.
“It is important for each government to show that they’re doing something for their population. But it’s not always clear that what they want to do is motivated by having the most common good for everybody.”
In his recent paper, published in the quarterly, The Connecticut Economy, Ahking analyzes two indices compiled by different agencies that took a multi-dimensional snapshot of competitiveness. And what he saw surprised him.
“I was surprised yes. Because if you just read and listen to radio and TV you get the impression we are not competitive. But in fact we are.”
At least according to one of his sources. The Economic Freedom in North America index, published by the Fraser Institute of Vancouver ranks Connecticut 10th out of 50 states and 10 Canadian provinces in its measure of economic freedom. In fact for one of its components, the relative size of government, Connecticut ranks third in the nation. The index also looks at taxation and labor market freedom in a total of 10 different sub components. The second source, the Freedom in the 50 States index, published by George Mason University, is much more detailed and less complimentary. It ranks Connecticut 38th in overall freedom. This index measures 138 different factors, half of which are measures of citizens’ personal freedom from government intervention, rather than economic freedom. The index includes policies such as minimum wage, healthcare mandates, right to work and worker compensation laws. Ahking says it's important to measure movement on these indexes over time.
“Both indices correlate very strongly with economic growth. You should know if you improve on it, you have increased economic growth.”
Ahking doesn’t offer specific answers or policy prescriptions, but says his ultimate aim is to prompt policy makers to think in three dimensions about economic growth and business competitiveness.
“This I hope will generate discussion. People can start thinking about not just corporate tax rate or income tax rate, but what other attributes are important in evaluating whether we are competitive or not competitive.”
For WNPR, I’m Harriet Jones.
