Hartford Business Journal

20 Hartford Business Journal • October 17, 2016 www.HartfordBusiness.com EDITORIAL CT's wealth gap a threat to economy T he United Way's second annual ALICE report painted another striking picture of two distinct Connecticuts. There's the affluent state in which Connecticut remains one of the wealthiest places in the nation, with an average per-capita income 141 percent above the national level. But there's also a growing population — 38 percent of the state's 1.36 million households to be exact — struggling financially, unable to afford basic needs such as housing, child care, food, health care and transportation. This resource-strapped population includes households living below the federal poverty level and those living above that level but who still struggle to meet what the United Way calls the average "household survival budget" for a Connecticut family of four, which ranges from $66,168 to $73,716 — more than triple the U.S. family poverty rate of $23,850. United Way has aptly labeled this group ALICE — for Asset Limited, Income Constrained, Employed. Make no mistake, this widening wealth gap, which mirrors a trend nationally as well, is a threat to the future well-being of Connecticut. Unfortunately, Connecti- cut's policies, along with an aging popula- tion and technology replacing the human workforce, only threaten to exacerbate the problem. Connecticut's ongoing budget crisis will likely lead to a continuing decline in govern- ment services to the state's most vulnerable residents, putting even more pressure on poverty-stricken families to fend for themselves. Cer- tainly the Great Recession had a major negative impact on the job-status and wages of many state residents, but it's now been more than a half decade since that downturn struck. Since then, Connecticut's economic recovery has lagged the nation's, and our fiscal position remains weak, despite lawmakers passing two of the largest tax increases in state history since 2011. Continuing to raise taxes to ensure the same level of government services remains intact, however, is not the answer. That will only exacerbate the problem by encouraging more employers and mobile residents to flee the state. Connecticut's tax-and-spend poli- cies have contributed to the gradual replacement of our well-paid, skills-based occupa- tions with low-wage jobs. In 2014, for example, 49 percent of jobs in the state paid less than $20 per hour, with two-thirds of those paying less than $15 per hour, the United Way report said. Projections show low-wage jobs will continue to increase in the year's ahead. To be clear, Connecticut still has a highly-skilled and educated workforce, but that competitive advantage is slipping, especially with the out-migration the state has experi- enced in recent years. From July 2014 to July 2015, Connecticut lost a net 3,876 residents, or 0.11 percent of its population, one of only a handful of states to see its citizenry shrink. Typically those who move out of state are younger residents or people with the financial wherewithal to do so — two groups Connecticut desperately needs to retain and grow. There are no easy answers to reverse course and a market correction won't happen overnight. But the only way Connecticut will be able to regain its economic vigor of days past is by improving the education prospects of its citizenry, particularly urban and minority students, and attracting more high-quality jobs. That, of course, will require state lawmakers to improve the business climate and not resort to tax increases (and new regulations), at a time when pressures to do so remain at an all-time high. Now more than ever, we need a policy environment that invites private-sector infra- structure and human capital investment. n OTHER VOICES Getting rid of a boondoggle for package stores By Edward P. Stringham P ackage stores recently found an unlikely ally in their goal of holding on to an archa- ic, anti-competitive special interest known as minimum-bottle pricing — anti-alcohol advo- cates. These advocates often put forth opinion pieces dressed up as research and then make huge logical leaps in unrelated conversa- tions to restrict alco- hol consumption. The advocates argue that ending minimum-bottle pric- es for spirits and wine would be a significant risk to public health — despite the fact that the other 49 states with no such statute are doing fine health-wise. And they argue that the additional money charged to consumers was necessary to off- set societal costs — despite the fact that the additional revenue does not benefit the state or any public program. The anti-competitive policy simply lines the pockets of package- store owners who lobby vigorously to keep market forces out of their business. Minimum-bottle pricing is nothing more than a scheme that allows alcohol wholesalers to set the minimum price at which all retailers must sell. This artifi - cially imposed price — which has no calcu- lated relationship to the per bottle whole- sale price — disserves the public and only benefits retailers who wish to avoid compe- tition and make cus- tomers pay more. The minimum- pricing scheme has three negative eco- nomic effects. First, higher pric- es restrict how much alcohol consumers can afford, and a typical consumer has to switch to cheaper brands. While value brands offer good value for the money, why should Con- necticut be forcing us to consume cheap booze? Second, many consumers end up crossing state lines for lower prices. For both of these effects, Connecticut loses revenue. Connecti- cut already has high excise taxes on alcohol and lowering it would be a positive step. But even if the excise tax rate were lowered, mini- mum pricing would allow package stores to keep those savings for themselves. Thus, ending minimum pricing is the only strategy likely to result in lower consumer prices. Stores should be allowed to, or have to, compete for customers and set prices based on supply and demand, not arbitrarily established minimum-bottle prices. The pricing require- ment serves no legitimate policy purpose but merely forces consumers to spend more. Would lower alcohol prices lead to a decrease in Connecticut residents' health? Not at all. We know from the Scientific Report of the 2015 Dietary Guidelines Advisory Com- mittee that moderate consumption of alcohol is shown to be a component of "a beneficial dietary pattern in most studies." Another CDC study published in Ameri- can Journal of Public Health in 2011 cited moderate alcohol consumption as one of four healthy lifestyle behaviors that, in combina- tion, can help people live longer. The four life- style behaviors were: having never smoked, eating a healthy diet, getting regular physi- cal activity and moderate alcohol consump- tion. The CDC researchers concluded that these low-risk lifestyle behaviors, "exert a powerful and beneficial effect on mortality." My own research on alcohol and earn- ings also found that drinkers earn 10 to 14 percent more than otherwise similar non-drinkers. It like- ly has something to do with social drink- ers engaging in more business networking with colleagues and potential clients. While anti-alco- hol advocates try to confuse the issue in order to further their agenda, their points have little relevance to a state government enforcing a decades- old statute that serves only to protect package stores from competition in a free market. Ending minimum-bottle pricing will not lead to the end of society — it will simply mean better prices and more options for con- sumers, and a merrier state. n Edward Peter Stringham is the Davis Pro- fessor of Economic Organizations and Innovation at Trinity College in Hartford. HARTFORDBUSINESS.COM POLL Does your company offer the ability to telecommute? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Is U.S. Rep. John Larson's $10B Hartford tunnel project a good idea? 43.8% Yes 56.2% No Edward P. Stringham OPINION & COMMENTARY ▶ ▶ Stores should be allowed to, or have to, compete for customers and set prices based on supply and demand, not arbitrarily established minimum- bottle prices. The pricing requirement serves no legitimate policy purpose but merely forces consumers to spend more. Send Us Your Letters The Hartford Business Journal welcomes letters to the editor and guest commentaries for our opinion pages. Electronic submissions are preferred and welcome at: editor@HartfordBusiness.com. ▶ ▶ Now more than ever, we need a policy environment that invites private-sector infrastructure and human capital investment.

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