Tebaldi: Rhode Island’s Path for Prosperity: Significant Improvement, But Challenges Persist

Tebaldi: Rhode Island’s Path for Prosperity: Significant Improvement, But Challenges Persist

There is much commentary making claims about Rhode Island’s economy. It is easy to get wrapped up in headline-grabbing statistics. But economics is more nuanced than that. It is important to parse which signals are most important without feeding preconceived or ideological notions. In my assessment, while our economy still has vulnerabilities resulting from decades-old structural problems that require attention, it is undeniable that the state’s position has improved significantly.

The unemployment rate decreased markedly over the last 4 years, standing at 3.6 percent in May 2019. Rhode Island based-jobs is above pre-Great Recession levels. Over 2,000 jobs have been created during the last 12 months. Job creation over the last 4 years was followed by an increase in real average wages slightly faster than the pace of increase in average wages in the nation. And 2018 was the first year over the last 12 in which the percentage of the population in the labor force increased. It is a frequently cited fallacy that the low unemployment data are hiding people who have stopped looking for work or part-timers due to economic reasons. In fact, in the last couple of years, the U6 unemployment rate, which in contrast to the standard unemployment measure includes discouraged workers, has fallen below the national average. We should credit both Governor Raimondo efforts and overall better economic conditions across the country for the improved situation in our state.

The remaining vulnerabilities continue to stem from the well-documented and disproportionate decline of manufacturing jobs and condition of infrastructure in our state over the last three decades, and, during that time, the inability of state leaders to transition our economy toward 21st-century success. To continue making progress, state leaders should do more, not less, to invest in advanced industry job creation, education, and public infrastructure.

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First, targeted interventions have made a difference in key industries in recent years. In some industries like scientific research, manufacturing, energy, and finance, our output growth outperformed the country’s. State leaders should make certain that important arrivals, like tech giant Infosys, biopharmaceutical manufacturers like Amgen and Rubius, and world-leading offshore wind firm Ørsted thrive, grow and continue creating jobs in the coming years.

Second, the state’s population is not only getting older, but it also lacking the skills needed to succeed in the digital economy, thus further investment in a well-educated population is crucial. Rhode Island’s labor force is suffering from the fact that, like much of the country, our population is stagnant and aging. And unlike our peers around New England, our proportion of people with at least a high school diploma is disproportionally low. The full range of efforts state leaders have undertaken in recent years, from expanding pre-K, current proposals to revamp the K-12 education system, focuses on skills training, and tuition-free community college all are policies that will pay off to our economy. These policies have to be scale-up not down.

Third, infrastructure matters for growth. When Rhode Island is ranked “bad for business,” the item that weighs the state down the most is its dismal infrastructure and the results of 30 years of poor investment decisions. To match the national average in per worker infrastructure spending, Rhode Island would need to increase infrastructure investments by $310 million annually. Initiatives like the RhodeWorks road and bridge program and Rebuild Rhode Island brick and mortar construction program are important efforts to turn this around. Similarly, new infrastructure and other public capital investments will continue making a difference and strengthen our state’s economic growth.

By encouraging job creation into high-wage and high-productivity industries, improving the education of our population, by attracting and retaining working-age talent, and by increasing investment in infrastructure, Rhode Island will set itself up for long term success. None of these are quick or easy fixes and results do not happen overnight. This is not the time to cut funding to infrastructure and business support programs, popular or not, that support economic development. Our leaders should do even more on these areas to set Rhode Island on the right course.

Edinaldo Tebaldi is a Professor of Economics at Bryant University