Hartford Business Journal

24 Hartford Business Journal • February 10, 2020 • www.HartfordBusiness.com OPINION & COMMENTARY ECONOMIST'S PERSPECTIVE The future is in leisure industry, not manufacturing By Fred McKinney I n 2015, candidate Donald Trump promised to bring back manufacturing jobs to the U.S. economy. But in reality, the real future growth industry is leisure, not manufacturing. Here's why: Since Jan. 2017, manufacturing jobs have in- creased from 12.3 million to 12.9 million in Nov. 2017, growth, but negligible, particularly con- sidering total U.S. employment has increased from 145.7 million to 157.3 million over that same period. Manufacturing job growth repre- sents 6% of all new jobs. The over- whelming majority of job growth is taking place outside manufacturing, and this is likely to continue to be the case in coming years. The economic forces driving the distribution of jobs across sectors of the economy are determined by global economic and technological forces that far outweigh the desires of politicians. Those global and technological forces also point to where future growth is likely to occur, and thus where small and diverse business owners might be well advised to con- sider in their own company strategic plans. For the most part, opportuni- ties for small and diverse businesses will not be in manufacturing. I often think about where markets and technology are going based on my own narrow needs, experiences, interests and demands. Although I am not a typical American consumer, through observations and data, it appears that American consumers/ workers are increasingly going to have more time on their hands, partly as a result of technology and rising standards of living. That leads me to believe the leisure industry has significant growth poten- tial. This is not a new phenomenon. In the earliest most comprehen- sive study of the work week, the typical American factory worker worked 68 hours per week in 1832. By 1880, the work week had declined to just over 10 hours a day and six days a week. In 1886, the American Federation of Labor announced its support for the eight-hour day. After great struggle, in 1914, Ford Motor Co. instituted a $5-a-day wage and eight-hour work day. Interestingly, labor productivity at Ford increased more than enough to compensate them for the reduced number of hours. We have been stuck with the eight-hour work day for more than 100 years. This is about to change. U.S. workers in all industries work about as many hours as our British counterparts — 1,680 hours per year. U.S. manufacturing workers averaged a whopping 2,065 hours per year. Ger- man workers clocked an average of 1,363 hours and experienced a 27 per- cent higher productivity compared to their British counterparts. EDITOR'S TAKE Interstate no-poaching compact puts CT at disadvantage E conomic incentives are once again front and center in Connecticut's public policy debate with the Lamont administration officially unveiling its new strategy to reward companies that create jobs in high-growth industries. But what's more interesting is a push by several state law- makers to get Connecticut to join a nascent interstate com- pact that restricts incentives states use to poach companies and jobs from each other. Rep. Josh Elliott (D-Hamden) and Rep. Jason Rojas (D-East Hartford) recently announced legislation that aims to protect the state against corporate blackmail by limiting Connecticut's abil- ity to actively recruit companies from other states using loans or grants and vice versa. They say New York, New Hampshire, Florida, Illinois, Hawaii and West Virginia are considering joining such a compact. Last year, Missouri and Kansas signed a his- toric agreement that prohibits tax incentives to companies that jump between those state's borders within the Kansas City region. As someone who's been highly critical of the way Connecticut has doled out economic incen- tives to companies in recent years, particularly under the Malloy administration, I was initially intrigued by the concept. But after thinking it through, and talking to a few experts, I think it's impractical. In fact, state lawmakers shouldn't waste time debating it because it could actually hurt Connecticut's economic competitiveness in the long run. The compact's underlying premise is that state in- centives are the main driver of company relocations and not companies themselves. That's a false notion. Talk to any corporate and commercial real estate expert and they'll tell you economic incen- tives may provide icing on the cake to a compa- ny's plan to relocate, but it's never a chief reason to move from one city or state to another. Other factors like tax and regulatory climate and workforce talent are much more important factors that influence where companies locate. "From a national perspective there is absolutely no traction" to interstate economic incentive compacts, said Tom Stringer, managing director and practice leader of site selection and incentives at BDO, an international accounting and consulting firm. "It doesn't make economic sense. This is the mercy rule for economic development. What Connecticut has to do is look inward quite frankly, look at its assets and look at its issues and try to fix them." Stringer, who is based in New York City, obviously has a stake in keeping incentives around but he's also familiar with Connecticut and has done several deals for corporate clients in the state over two decades. He said companies need to be free to move and make business decisions while communities and regions must have a value proposition that encourages economic growth. He said Connecticut has many attractive assets — an inordinate amount of wealthy people and hedge funds, Yale, UConn, proximity to Boston and New York, high quality of life, etc. — but its value proposition compared to the cost of living and doing business here presents challenges. "Tax regime, permitting process, regulatory environment — those are all negatives," he said. "What Connecticut has to do is find a way to say despite the cost, here are the assets, here is the value proposition. They've got to get their arms around this. Connecticut has had a number of Fred McKinney Greg Bordonaro, Editor

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