In May, trends in U.S. unemployment appeared to take a positive turn, one unexpected by many economists. And as the Midwest’s legislators learned on a webinar that same month, changes in this closely watched economic indicator have huge impacts on states’ bottom lines.
“When the national unemployment rate goes up by one percentage point, there are budget shortfalls across all states of about $45 billion,” Michael Horrigan, president of the W.E. Upjohn Institute for Employment Research, said during the webinar hosted by the Midwestern Legislative Conference Economic Development Committee.
“The other estimate that we’ve come up with is that if a state unemployment rate goes up by one percentage point, states lose about 7 percent in tax revenue.”
Though the May numbers were promising — the result of factors such as the end of stay-at-home orders, business reopenings and an influx of federal dollars that, in part, encouraged businesses to retain workers — unemployment rates remain historically high.
Since early April, Rep. Dave Greenspan and 23 other members of a specially formed Ohio House task force have been meeting, sharing ideas, and getting the perspective of business owners across various sectors and geographic areas.
One question above all else is guiding his work on the task force: What can we do to help businesses reopen, and remain open, safely?
“We’re not looking at the same things that the governor is looking at as far as public health protocols,” Greenspan says. “Our attention is on what we can do either directly through legislation or by facilitating, through other bodies, actions that allow [businesses] to open.”
That Economic Recovery Task Force in Ohio is an example of the important work being done by the Midwest’s legislatures, even during a time when the powers of governors have been strengthened due to the public health emergencies caused by the COVID-19 pandemic.
As of early March, Wisconsin was set to become one of the first states in the nation to expand incentives for private investments in federally designated Opportunity Zones. Under AB 532, which passed with bipartisan support in the Assembly and Senate, Wisconsin would double the tax credits for investors supporting projects in financially strapped, low-income communities across the state. (The bill had not yet been signed by the governor as of early March.)
In Iowa, Gov. Kim Reynolds has made improving economic opportunities to all areas of the state a top priority. To do this, she has placed a particular focus on rural Iowa and the challenges faced by those communities.
Since 2018, state and community leaders have taken part in the governor’s Empower Rural Iowa Initiative in order to address the challenges facing the state’s rural communities. The initiative’s work resulted in legislation and a set of recommendations for continued action.
Sixty percent of Iowans live in counties with populations less than 100,000 and 30 percent live in counties with less than 25,000, making rural Iowa critical to the entire state, says Iowa Sen. Mark Lofgren.
Marysville, Ohio, is home to the first Honda manufacturing plant in America. It opened in 1979 with 64 workers assembling the company’s Motocross motorcycle. Auto production soon followed. Now in its 40th year of production, the original plant, along with several nearby operations, employs 13,000 workers in the northwest part of the state.
Ohio Rep. Jon Cross, whose district lies just north of the Marysville plant, has visited the facility and seen the work being done there. “It’s highly technical, highly skilled,” he notes, more of what one might expect at a tech company rather than a car manufacturer.
More and more, that is the reality of work in manufacturing and other sectors of the Midwest’s economy — the result of advances in technology, automation and robotics. For states, that means economic growth depends in part on having a highly skilled, adaptable workforce able to keep up with the fast pace of change.
According to the U.S. Bureau of Labor Statistics, as of June, there were 1.5 million job openings in the Midwest (see map for state-by-state data), and many businesses say they can’t find enough people with the necessary skills to fill the vacancies that they have.
Parts of this region, too, have among the lowest unemployment rates in the nation; Ohio’s is actually a bit over the national average, but it’s still only 4.2 percent.
“That basically means we’re at full employment, and that’s really great for the economy,” Cross says. “But the downside is that businesses are [struggling] to grow and find new employees.
“Where are these new employees going to come from?”
The answer to that question, in Ohio and other states, is more complicated than simply relying on new high school or college graduates. “Colleges are not pumping out enough people to fill the new positions that are going to be available in our workforce in the next three to five years,” Wisconsin Sen. Dan Feyen says about the labor market challenges in his state.
“So we need to make sure that we can take people within our existing workforce and put them in jobs where they can excel.”