Competing for (and investing in) high-income jobs

John Wiley, outgoing chancellor of the University of Wisconsin-Madison, was writing about issues in his own state, but his words should be heard across the border. (And not just because he compared Minnesota favorably to Wisconsin.)

Here are a few excerpts from Madison Magazine's "From Crossroads to  Crisis."

If there are any two natural allies in economic development, they are higher education and the business community. So where is the business community on these issues? The high-tech community is vibrant and growing rapidly, yet is largely disorganized. Its members are understandably too preoccupied with developing their products and their markets to become much involved in public policy or lobbying, and most of them aren't big enough--yet--to be players in the political process. I know these entrepreneurs: Nearly four hundred of their companies trace their origins to our laboratories.

[...]

According to 2007 U.S. Census Bureau numbers, Wisconsin currently has the eleventh-highest per capita state tax revenues in the nation, and WMC [Wisconsin Manufacturers and Commerce, a business trade organization] cites the statistic as evidence that Wisconsin is a "tax hell." But look at the ten states with higher per capita taxes than Wisconsin: Hawaii, Wyoming, Connecticut, Minnesota, Delaware, Vermont, Massachusetts, New Jersey, California and New York. Nine of the ten have higher per capita income than Wisconsin. In particular, Minnesota, our demographic twin, has the fourth-highest per capita taxation, and they're knocking our socks off economically. They are currently ninth in the nation in per capita income while Wisconsin has slid to twenty-first. And of the ten states with the lowest per capita taxation in the country--Arizona, Georgia, South Carolina, Tennessee, Missouri, Alabama, New Hampshire, Colorado, South Dakota, and Texas--eight have lower per capita income than Wisconsin.

So which economies should we aspire to: the dynamic, high-income, high-tech, twenty-first-century economies of Minnesota, Delaware and Massachusetts, or the economies of South Carolina, Tennessee and Alabama?

[...]

The high-tech companies that are the future of Wisconsin's economy couldn't care less about hypothetical "minimum-wage" jobs: They don't have any such jobs. And it's been a long time since organized labor was able to negotiate wages exceeding those already set by normal supply-and-demand market forces. Even in the direct consumer service sector, employers who offer only the official state or federal minimum wage are unable to attract or keep employees.

[...]

Don Nichols, an eminent UW economist, conducted a detailed study aimed at understanding the steadily widening gap between per capita incomes in Wisconsin and those in Minnesota (view the report). In a nutshell, Nichols found his answer in the top ten percent of all wage earners. Wisconsin has too few high-income jobs, and those who earn in the top ten percent still make less than their peers in Minnesota. Wisconsin is already extremely competitive in the bottom ninety percent of jobs.

This is partly just a matter of arithmetic. Per capita income is one simple and useful measure (among many) of the overall economic health of an economy. If our current per capita income is $33,565, or about $17/hour, according to the U.S. Census, then we need lots more new jobs paying more than $17/hour than jobs paying less than $17/hour to raise that average. I know there are many tasks in the economy that do not have an economic value exceeding $17/hour. But, while more $9.50/hour jobs may help entry-level workers survive until they can advance to the next rung, it is the new jobs above $17/hour that will enable Wisconsin to thrive, and lift everyone.

— Charlie Quimby

Comments

[CommonSenseRambler]

This is a funny article. It proves that high taxation does not correspond to high incomes yet that's exactly what they appear to be advocating.

MN may have a stronger high-tech economy than WI, but it's not due to our higher per capita taxation. Economics is not as complicated as some think. The fact is easily proven that MN has lost thousands and thousands and thousands of good paying jobs strictly due to their disadvantaged high taxes. Major corporations, including some fortune 500 companies have moved out of MN in favor of locating in more favorable environments for taxes. I don't remember any company moving claiming they just don't have the talent pool we need here in MN. They are moving because they can be more economically viable in lower taxed states.

When will governments realize that their job is not about giving as much stuff to their inhabitants as they can get away with? Government policy should be "The only way we can provide more services to our people is by first helping to create an environment where our people can be more prosperous." When people make more money, overall tax revenues automatically go UP. Lowering taxes will encourage corporations to set up shop here in MN and encourage higher income individuals to stay/come to MN, which will ultimately increase tax revenues and increase the "gap" that exists between MN and WI.

The winner of this competition will be to see who can lower taxes the fastest.

Goodbye Northwest!

[Charlie Quimby]

Try reading again.

The higher tax states generally also have higher incomes. I don't see the author claiming this "proves" high taxes cause high incomes. But the fact that they are correlated makes the opposite claim very weak.

The author is writing about how public investment in higher education and university R&D helps create those higher paid jobs. They don't magically appear due to lower taxes, or Alabama would have the Silicon Valley.

"The fact is easily proven that MN has lost thousands and thousands and thousands of good paying jobs strictly due to their disadvantaged high taxes."

If it's easily proven, perhaps you would like to share the proof with our readers.