Douglas Hall PhD – RI Future

March 31, 2016March 31, 2016

Rich people have paid sick days. Poor people do not.

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Rhode Island’s House Committee on Labor is today considering H7633, An Act Relating To Labor And Labor Relations— Healthy And Safe Families And Workplaces Act, legislation that if passed would provide Rhode Island workers with earned paid sick days.

Among the basic provisions of this legislation are the following:

Annual accrual of 56 hours (equivalent to seven 8-hour work days) of earned sick leave.
Ability to make use of paid leave after 90 days.
Rollover of unused sick leave into new calendar year, with option to instead pay employees for unused time.
Protection of earned sick leave time in the event an employee is transferred to a different division of the same company, and in the event that “an employer succeeds or takes the place of an existing employer”.

Until national legislation is passed providing earned paid sick time, state and local provisions can provide this important family-friendly employment standard. As of March 2016, five states have passed earned paid sick time legislation, including three of our New England neighbors, Connecticut, Massachusetts, and Vermont. As well, at least fifteen cities and counties have passed legislation providing earned paid sick leave, including San Francisco, Washington, DC, New York, Philadelphia, Portland (OR), and San Diego.

The experience of those jurisdictions that have been leaders in enacting family-supporting earned paid sick leave is instructive. In San Francisco, the first jurisdiction to introduce earned paid sick leave, employment in the five years after implementation of their earned paid sick leave provisions grew twice as fast in the city than in neighboring counties lacking earned paid sick leave, and grew even faster in the food service and hospitality industries with significant concentrations of workers benefiting from the new provisions.

A report by the Center on Economic and Policy Research found that in neighboring Connecticut, the policy was implemented at little to no cost for business (consistent with findings from an Economic Policy Institute study prior to passage), and that two years after initial implementation, more than three-quarters of employers were supportive of the law.

Provision of earned paid sick days results in significant savings for both employers and government:

Employer savings are considerable, and include savings due to:

increased worker productivity,
Lower turnover rates
Reduced workplace contagion from reduced presenteeism (attending work while sick)
Fewer workplace injuries

Government saves through savings to public health insurance programs, through reduced reliance on emergency rooms for treatment of illnesses. With availability of paid sick time, an employee is able to schedule an appointment with his/her primary care provider for diagnosis and treatment. One recent study shows that extending earned paid sick leave to all currently uncovered would save over $1.1 billion annually, including savings of $517 million to public health insurance programs such as Medicaid. Other savings result from reduced reliance on public assistance, as nearly one in four employees report losing a job or being threatened with job loss for taking time off due to personal or family illness. Earned paid sick leave gives employees much needed economic security, which is critical to family stability.

One significant reason to pass paid sick leave legislation is that failing to do so further exacerbates disparities based on income. The Economic Policy Institute shows in stark terms that “rich people have paid sick days [while] poor people do not.” While only one in five (20 percent) of private sector workers in the bottom 10 percent of wage earners has earned paid sick time, nearly nine in ten (87 percent) of top-five wage earners have earned paid sick time.

The case for providing earned paid sick leave to workers in Rhode Island is strong. It’s good for businesses and workers, making Rhode Island a more family-friendly place to live and work.

March 10, 2016

Increasing Rhode Island’s minimum wage and expanding the state Earned Income Tax Credit (EITC) boosts the economy, helps thousands of Ocean State families

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The Governor’s Budget Article 13 increases the minimum wage to $10.10 next year and expands the state earned income tax credit from 12.5 percent to 15 percent of the federal credit (the Governor indicated an interest in further expanding the EITC pending available resources following the mid-year revenue forecast). Senator Goldin and Representative Slater have each introduced bills ((S 2156 and H 7347, respectively) to further increase the EITC to 20 percent of the federal credit. Lawmakers have made real progress in these two areas over the past two years and we are pleased to see a commitment to raising the labor and living standards of our workers going forward.

These two measures are particularly important in light of the persistent decline in Rhode Island’s low wages since 2000, and the gap between low wages in Rhode Island and those in Connecticut and Massachusetts, evident in Figure 1.

Research shows that coupling an EITC increase with an increase in the minimum wage has a greater impact on reducing poverty than either does on its own. This finding contradicts those who point to one approach as superior to the other in helping low-wage workers make ends meet. Both, together, have maximum beneficial impact. Using these policies together also requires that businesses and our government both play key roles in boosting incomes for workers in low-wage sectors, which is both fair and practical.

Today, minimum wage workers do not earn enough to meet basic needs. The Rhode Island Standard of Need, a study that documents the cost of living in the Ocean State, shows that a single adult needed to earn $11.86 per hour in order to meet his or her most basic needs in 2014.

As seen in Table 1, Rhode Island currently significantly lags its neighbors, Massachusetts and Connecticut, in the size of state EITC, and will fall behind Connecticut (and even further behind Massachusetts) for the minimum wage, unless the Rhode Island minimum is increased to at least $10.10 in 2017. Both of our neighboring states have steadily increased their minimum wages in recent years.

EITC filers pay payroll taxes, sales and property taxes, the car tax, gas tax. Even with the increase in the state EITC to 12.5%, Rhode Island still has one of the highest effective tax rates on low-income households, when looking at the combined state and local taxes – 7th highest among all states. The EITC is the best way to provide some targeted tax relief to those who need it most.

Compared to our neighboring states, families in the bottom quintile (bottom 20 percent of family income) pay 12.4 percent of their income in state and local taxes, compared with 10.0 percent in Massachusetts, and 10.6 percent in Connecticut. Increasing the RI EITC helps close this gap modestly – a 15 percent EITC in Rhode Island would lower bottom quintile taxes to 12.2 percent, and a 20 percent EITC would lower it to 12.0 percent, according to recent analysis by the Institute on Taxation and Economic Policy, evident in Figure 2. (Higher sales and excise taxes in RI account for much of the current gap).

Putting more money in the pockets of workers will also put more money in the cash registers of local businesses. Raising the minimum wage to $10.10 would put nearly $27 million in the pockets of 78,000 Rhode Island workers in low-wage jobs, money that would flow quickly into the local economy.

Raising the minimum wage and the EITC are important steps that lawmakers can take to help ensure that workers are able to keep their heads above water in the Ocean State, and to keep the Rhode Island economy on a path to full economic recovery.

February 24, 2016

Infrastructure investment is smart state economic policy

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A new paper released yesterday by the Center on Budget and Policy Priorities (CBPP) is the latest study making the case that infrastructure investment is one of the best investments for state government, creating jobs today, and laying foundation for future prosperity. While this is not news (a 2010 paper from the Political Economy Research Institute at the University of Massachusetts showed that infrastructure spending and investments in education and training were the best tools in the tool boxes of New England states to ensure current and future prosperity) it comes at an opportune moment for Rhode Island, just a couple of weeks after the legislature passed an extensive package of infrastructure investments aimed at overhauling our deteriorating roads and bridges.

In “It’s Time for States to Invest in Infrastructure,” CBPP Senior Fellow Elizabeth McNichol urges states to make sound infrastructure investments. Now is the time for states to reverse years of decline and step up investment in state-of-the-art school facilities; up-to-date water treatment plants; better highways, railroads, and ports; and other public infrastructure — which is vital to creating good jobs and promoting full economic recovery.

The Center on Budget report places Rhode Island third last among all states (ahead of only Michigan and New Hampshire) for total state and local capital spending as a share of state gross domestic product in 2013 (the most recent year for which 50-state data are available).

Here in Rhode Island, years of neglect have resulted in consistently low ranks on infrastructure such as roads and bridges – more than one in five bridges in our state is structurally deficient according to the American Society of Civil Engineers, and 41 percent of our roads are in disrepair, compromising public safety and costing motorists nearly half a billion dollars a year in additional transportation and repair costs. This state of disrepair should come as no surprise – since 2000, Rhode Island has ranked in the bottom three for state and local capital outlays as a share of GDP in ten of the twelve years for which we have data.

Since 2013, more infrastructure investments have been made. In 2015, the General Assembly approved a five year, $3.4 Billion Capital Budget, heavily weighted towards investments in transportation (43.2%) and Education (17.9%), spanning investments in K-12 schools, higher education facilities, as well as vocational schools, and the School Building Authority was created to oversee the process of overhauling the state’s crumbling school buildings.

The Governor’s 2017 budget proposal recommends significant further capital investment such as in Rhode Island’s public colleges, for affordable housing, and for the “Rhode Works” overhaul of the state’s transportation infrastructure. The recently passed Rhode Works legislation provides much-needed investment to fix Rhode Island roads and bridges and underscores the importance of raising sustainable revenue to ensure that our transportation infrastructure is well-maintained and safe for those who use them.

Modernizing Rhode Island’s transportation systems and other infrastructure boosts productivity by supporting businesses and residents, improving the education and job readiness of future workers, and helping communities to thrive. Investing in our infrastructure will also provide immediate job opportunities for Rhode Islanders who are working less than they would like and making less than it takes to get by.

Infrastructure investments typically bring higher wages and better quality of life for years in the future. Investing in our public infrastructure – our roads, bridges, schools, ports, and more – creates immediate jobs, makes our communities safer and healthier, and lays the foundation for a brighter future for all Rhode Island families.

January 19, 2016January 20, 2016

A tale of two Brookings reports

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On Friday, the Brookings Metropolitan program released a report, City and metropolitan inequality on the rise, driven by declining incomes in which Rhode Island’s largest and capital city, Providence, emerges as the city with the 5th highest level of income inequality in the nation. A principal cause of this high rating is the erosion of wages (and hence income) for low income workers in Rhode Island, a situation likely exacerbated in Providence. Too many Rhode Island workers continue to feel the ongoing pain of the Great Recession that began more than eight years ago, and (at least officially) ended more than six years ago, experiencing levels of long-term unemployment, and underemployment that erode their financial well-being. The Rhode Island economy isn’t working for these people. Among those currently in the slow lane on the “Rhode to Prosperity” workers of color comprise a disproportionate share, as recently documented in The State of Working Rhode Island: Workers of Color.

On Tuesday, the Brookings Metropolitan program released a report, Rhode Island Innovates: A Competitive Strategy for the Ocean State¸ a report that expertly assesses the Rhode Island economy, using complex sector-based analyses to identify its comparative areas of strength, and some of the challenges that may prevent businesses from choosing the Ocean State as their home. The Brookings study presents several strategies to improve the business climate, noting that “Rhode Island is poised to emerge as a leader on business environment re-engineering.”

To Brookings’ credit, they point in Rhode Island Innovates to the importance of sustaining “good jobs” (which they define as those that “offer livable wages with benefits for full-time workers who have less than a four-year degree”), and they correctly note that the old mantra of “jobs, jobs, jobs” is no longer adequate or appropriate to today’s economic realities. Yet it feels very much like the two Brookings reports each exist in their own spheres. What Rhode Island (and arguably every other state in the nation) needs is an approach to the economy that integrates the needs of its workforce with the needs of the business community. Innovation and growth are important, but unless such growth advances the well-being of Rhode Islanders regardless of age, race and ethnicity, we will remain diminished as a state.