CT lags behind U.S. in job and income growth, report says

Posted by Admin October 14, 2024 Jobs

Post-pandemic Connecticut has fallen behind nationally in several key economic metrics, including in job growth which is 3.3 percentage points lower than that of the national average, according to a new report.

This means there are about 55,560 fewer jobs in the state than if Connecticut had maintained its growth with the U.S. since February 2020, says the report by the research-based advocacy group, Connecticut Voices for Children. It recommends specific policies — like raising the subminimum wage for those who rely on tips — to improve the state’s job outlook.

The “The State of Working Connecticut” which was released last month, highlights several aspects of Connecticut’s economy and wages and makes recommendations that could impact both employers and employees in the service industry.

The difference between the state’s job growth and the national average increased slightly from last year’s report, which stated Connecticut’s employment growth then was 3.1 percentage points lower than the national average.

Chris DiPentima, president and CEO of the Connecticut Business and Industry Association, or CBIA, said one reason for the gap is the difference between unemployment and job openings.

“In Connecticut we have 90,000 job openings. We have more job openings than we have unemployed people,” he said. DiPentima estimates Connecticut has about 60,000 unemployed people, meaning even with a 0% unemployment rate, there would still be many unfilled jobs.

Patrick O’Brien, researcher and policy director of Connecticut Voices for Children, said both low and middle-income workers are greatly affected by the state’s stagnating job growth.

“Focusing first on low wage workers, we showed that real wage growth since 2019 has helped to increase their standard of living,” O’Brien said. “But we also noted that the historic surge in inflation since 2021 has significantly eroded some of those gains.”

He said the same applies for middle-income families.

“The decrease in real wages since 2019 compounded by the historic surge in inflation, has made it increasingly difficult for these middle wage workers to maintain, let alone improve, their standard of living,” he said.

Recession and inflation

The report examines two events that affected Connecticut’s economy — the Great Recession in 2007 and the pandemic-induced recession in 2020. For the U.S., the recent recession resulted in employment decreasing by 14.4% from February 2020 to April 2020, or a loss of 21.9 million jobs, according to the report.

The report states the nation fully recovered those lost jobs by June 2022. In contrast, Connecticut’s employment fell by 17.1%, or about 291,100 jobs, and it took until October 2023 for the state to fully recover those lost jobs.

The report estimates that had the state maintained its pace with the U.S., it would have an additional 55,560 jobs today. “It is true we’ve recovered fairly quickly relative to past recessions, but when you compare our recovery to the U.S. as a whole, we’re still lagging there,” O’Brien said.

He said he worries about the implications of a slower recession recovery and subpar job growth. It reflects a bigger issue for the Connecticut economy, he said.

“I think the budget surpluses in the state and what’s been viewed as a pretty strong budget for the past few years, has made it appear that recovery from the pandemic-induced recession has been stronger than it is,” he said. “Part of what we’re trying to lift up is showing the potential budgetary implications of our relatively slower recovery.”

DiPentima said he agrees with the findings of the report and echoed the concerns it raises.

“Before the pandemic hit, we had very anemic job growth from ’08 to ’18 following the financial crisis and the Great Recession, as well as negative population growth,” DiPentima said. “Then post-pandemic, while we’ve seen some population growth, the job growth continues to lag.”

Despite recovering from recessions, the slow job growth reflects a bigger issue for Connecticut: how expensive it is to live in the state, he said.

“We passed the largest personal income tax reduction of $600 million two years ago, and it had a big effect on those making less than $150,000,” DiPentima said.

He argues legislation must address the high cost of living to maintain the state’s population.

“Businesses and residents are getting impatient. It’s been four years now, the cost of living has come down a little bit, but it’s really just keeping up with inflation. Quite honestly, it needs to come down at a much faster rate,” he said.

“Then we can have more population growth in Connecticut, and the business climate needs to become a little easier.”

He said that while businesses might not be leaving Connecticut, they are expanding outside the state.

“It’s not something that’s often reported in the media because it’s not a business that’s getting up and leaving. They’re not growing in Connecticut, they’ve expanded elsewhere,” he said. “They’re going where there’s a lower cost of doing business, lower cost of living and more population growth happening. As a result, it’s easier for them to fill their job openings.”

State comparison and wages

Estimates from the recent report compare Connecticut with the national average, but “An Overview of the CT Child Tax Credit,” a CT Voices report released in January, compares each state’s economic recovery from the COVID-19 pandemic. O’Brien said the issue is not specific to New England but to Connecticut.

“We showed essentially that Connecticut’s real economic growth was 1.3% at the time, which was the 11th slowest of any state in the U.S.,” he said. “In comparison, the U.S. and New England both average around 5%. We were not only the 11th slowest state in our economic growth in 2019 to 2022, we were the slowest state in all of New England as well.”

Connecticut fares no better in recovering from both the Great Recession and the pandemic-induced recession. New England’s real economic growth from 2007 to 2022 is estimated to be around 20% while Connecticut falls behind at –1.7%, the third slowest state, according to the Child Tax Credit report.

O’Brien said there are a number of factors for why Connecticut is an outlier in New England.

“One of the issues that we left up in the report was that our public sector job recovery is slower than what’s going on in the U.S., and that’s important for a few different reasons,” he said. “One of which is that’s the sector over which policymakers have the most direct control whether they’re filling those public sector jobs.”

Although Connecticut is an outlier statistically, DiPentima said he feels that all states are struggling with the same problems, just to varying degrees based on economic situation.

“I talked to my counterparts across the country. While they may have better job growth than Connecticut, every state has a significant number of job openings,” he said. “In fact, when you talk to businesses across the country and the world, they’re looking to expand in places struggling with the crisis less so.”

As for the jobs that already exist in the state, the report describes the current wages and trends. The wages for low and middle-income workers in Connecticut vary in terms of growth.

“From 2019 to 2023, real wage growth in Connecticut was the highest for low-wage workers, averaging 11.4 percent and helping improve their standard of living. In contrast, real wage growth averaged -0.5 percent for middle-wage workers, making it more difficult for these workers to maintain their standard of living,” the report states.

Low-wage workers in Connecticut had a real wage growth of about 11.4%, while the national average is 6%. The report credits this growth to the state’s increase in minimum wage, which became $15.69 per hour earlier this year and will increase to $16.35 in January.

The state’s growth in wages for low-income workers is still subject to issues like wage gaps. The CT Voices report states “Connecticut continues to have substantial gender, racial, and ethnic wage gaps — even generally when controlling for many key factors — and the wage gaps apply to both low- and middle-wage workers.”

For each dollar that men earned, women in Connecticut earned about $0.78 to $0.88 from 2000 to 2023, according to the report.

Policy options

CT Voices for Children and O’Brien are pushing for lawmakers to combat these issues through a series of labor market policies and tax policies. A major recommendation they made is to eliminate the subminimum wage.

The subminimum wage is the wage paid to service industry employees who also rely on tips. In Connecticut, the subminimum wage is $6.38 per hour for most service industry employees, while it’s $8.23 per hour for bartenders.

“We highlighted the fact that our minimum wage is now tied to employment cost index,” he said. “So, it’s going to make this gap between the subminimum wage and the minimum wage grow over year, because the subminimum wage is not inflation indexed.”

The report states that employers must pay a tip credit if the minimum wage is not met, creating a backlog of wage theft complaints as workers struggle to receive the pay they’re owed. From January 2012 to April 2023, the U.S. Department of Labor determined that Connecticut employers owed workers over $10.3 million.

But not everyone believes altering the subminimum wage is the right way to go.

“We did an analysis on [eliminating the subminimum wage]. Those working in the service industry and those running it don’t feel that’s the right way to go,” DiPentima said. “They’re going to end up minimizing them on the tip side of wages in exchange for the base cap, when the service workers and restaurant owners we talked to want the high wage opportunity with tip wages.”

DiPentima said that Connecticut has the fifth highest wages in the country, even with service providers and other industries. “About 15,000 of the 90,000 job openings are in retail, restaurant and service industries,” he said.

Rather than focusing on eliminating the subminimum wage or adding predictive scheduling, DiPentima said they should be focusing on “getting folks who are unemployed the basic skills needed to get engaged in the service industry.”

Other policy recommendations are geared toward creating more jobs or making it easier to live and work in Connecticut. They recommend establishing predictable scheduling, limiting the number of noncompete agreements and filling public sector jobs.

“If you really want to boost job growth, you’re going to need our population to grow in the state. That’s going to require more affordable housing for people to move here, to stay here, to have children here,” O’Brien said.

CBIA recommends increasing opportunities for young people to become a part of Connecticut’s workforce, and encouraging them to stay in the state rather than move away. “We need to do more. Making sure our students have pathway programs, internships, apprenticeship opportunities,” DiPentima said.

Both Connecticut Voices for Children and CBIA said they encourage policies to help Connecticut families.

“We’re showing that good public policy aimed at supporting families, and their children also tends to help the state deal with some of these other problems that are sometimes viewed as separate, even though they’re really tied together,” O’Brien said.