Business leaders see government policies driving Pennsylvania’s population dip

By Michael Carroll / Watchdog.org

Pennsylvania business leaders see the recent decline in the state’s population as a result of tepid economic growth, an oversized public sector and an overall lack of competitiveness.

Pennsylvania’s population dropped by more than 7,600 between 2015 and 2016, according to an economic outlook report from Wells Fargo Securities.  The Keystone state was one of eight states, including New York, Illinois, Connecticut and West Virginia, to suffer a net loss in residents during that time period, the Wells Fargo study said.

“Pittsburgh lost 9,000 residents in 2016,” the report by economists Mark Vitner and Jamie Feik said. “The 0.4 percent drop was the worst percentage decline among the nation’s 50 largest metro areas, a spot Pittsburgh has claimed in three of the past four years.”

The state’s population outside of its metro areas has been in decline since the beginning of the 2008 recession, the report said. In addition, residents fleeing Pennsylvania for other states numbered 45,000, compared to the 35,000 who moved into the state in 2016, according to Wells Fargo.

“There’s a lack of economic dynamism in the rural parts of the commonwealth,” David N. Taylor, president of the Pennsylvania Manufacturers’ Association, told Watchdog.org.

Many communities have been allowed to age in place, and many of the sons and daughters of professionals in the state went off to college and didn’t return, preferring instead to work in areas of the nation where the rewards are greater, Taylor said.

“We need state government to get its act together with fiscal discipline and tackling the pension crisis,” he said, adding that Pennsylvania needs to compete on the level of high-performing states such as Indiana.

A bright spot is the energy sector and the production of low-cost natural gas in the Marcellus and Utica shale regions, Taylor said. By building out the infrastructure in the rural areas where the natural gas is produced, Pennsylvania can attract more industries with its available energy resources, he said, rather than simply shipping the gas out of state.

“That is what can reach into those rural communities that have not seen prosperity for a long time,” Taylor said.

A pro-energy production agenda in the state can help turn things around, he said. But politicians in Harrisburg take actions that raise the cost of human capital, according to Taylor, and that in turn leads businesses to rely more on automation.

“So we continue to slog along at growth that’s under the national average,” Taylor said.

But helping the energy industry in the state to mature and grow offers Pennsylvania a way out of its slump, he said. That would supercharge the manufacturing sector and raise the state’s fortunes, Taylor said.

“We want every last rivet of infrastructure and every last Btu of energy … that we can get out of this sector,” he said.

Gene Barr, the president and CEO of the Pennsylvania Chamber of Business and Industry, shared many of Taylor’s concerns about the shrinking population and the likely economic causes.

“It’s one of the symptoms that we see of states that are heavy in bureaucracy,” Barr told Watchdog.org.

Pennsylvania is not a right-to-work state, meaning workers can be compelled to join a labor union as a condition of employment, he said. And it has one of the highest corporate tax rates in the nation, Barr said, and is burdened by excessive pension system debts.

Like Taylor, he said that building up the natural gas infrastructure in rural areas could attract new industries and jobs to the state. One positive development in Pittsburgh is the construction of what’s known as an ethane cracker, which will produce plastics and other products for Shell Chemical Appalachia.

Barr sees such projects, which will employ hundreds of full-time workers when completed, attracting other companies as well.

The Wells Fargo report points out that the state’s unemployment rate stands at 5 percent, well above the national average.

“The urban-rural divide in Pennsylvania is one of the most brazen in the nation,” the report says. “Personal income per capita is now $13,000 higher in Pennsylvania’s metro areas than in its rural counties, the fifth largest gap among states.”

Another problem in the state involves workforce development, according to Barr, who said that businesses often cannot find the people with the right skills for the jobs that are available. Due to the opioid crisis, employers find difficulties just getting people who can pass drug tests, he said.

A recent report by the Commonwealth Foundation’s director of policy analysis, Elizabeth Stelle, faulted high taxes for the state’s shrinking population. States with high population growth such as Texas, Florida, Nevada and Idaho place lower tax burdens on their residents, the foundation’s report said.

“Without bold steps to spend responsibly and lighten the tax burden, we’ll continue to see fellow Pennsylvanians flee to friendlier tax climates,” Stelle’s report said.

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