Pro-Growth Policies Needed to Build on Economic Momentum Going into 2020

From PA Chamber of Business & Industry

As we head into the final year of the 2019-20 legislative session, the results of the PA Chamber’s recent Economic Survey confirm two key trends for state and federal lawmakers to take heed of: with the economy continuing on an upward trajectory, businesses are cautiously optimistic, but there are major concerns regarding the status of the Commonwealth’s workforce. The policies enacted in our state and national capitols, particularly as they relate to energy, labor and trade will be the determining factors in whether Pennsylvania’s economy either builds on this positive momentum or falls behind.

Each year, we survey hundreds of executives across the state, seeking their responses on a number of policy issues and general business matters. As I’ve previously noted, for the second year in a row, employers are identifying the lack of a skilled workforce as the number one problem facing their companies. Many employers are also reporting they expect to hire more workers in the next year. Jobs without people is just as big a problem as people without jobs. To that end, it’s important to recognize two broader trends in regards to Pennsylvania’s changing demographics. First, the state’s unemployment rate continues to remain low, and the number of working Pennsylvanians is at an all-time high. However, the state continues to age while overall population stagnates. Workforce, which is already a challenge, will become an even bigger hurdle to businesses in Pennsylvania if this trend isn’t reversed.

That is why it is critically important that our elected officials focus on policies that will improve the state’s business climate. Pennsylvania has an opportunity to be a beacon for investment and innovation, but only if the private sector is given the ability to continue to grow.

Recent analyses by the economists at Wells Fargo note two of the biggest contributors to employment growth and GDP gains have been the state’s natural gas and biotechnology sectors. Conversely, the only sector of the state’s economy to have shed jobs over the past twelve months is in manufacturing.

We believe this is in part due to the impact of tariffs and a national trend in a decline in export orders. A better national approach to trade is in order, starting with Congressional ratification of the United States-Mexico-Canada Agreement, or USMCA. 1.5 million Pennsylvania jobs depend on international trade, with two of our biggest trading partners being Canada and Mexico. 

Additionally, state lawmakers need to follow the federal government’s lead by enacting meaningful regulatory and tax reform. We consistently hear from our members that Pennsylvania’s overly burdensome regulatory environment continues to be a barrier to growth. Likewise, the Commonwealth’s tax structure also sends red flags to potential investors. A recent Tax Foundation report found that the state’s overall tax climate ranks 29th in the nation and the corporate tax structure ranks an abysmal 46th. We need to make fundamental changes in these arenas if we want to compete on both a national and global scale.

The health of the state’s manufacturing sector is vital to the health of its other industries, given how much these facilities support jobs in construction, utilities, health care, schools and services. A contraction in the manufacturing sector could portend broader economic consequences, which means lawmakers should be especially careful about contemplating energy policies that would increase costs on energy-intensive industrial customers. As discussions surrounding climate and air quality policy continue in Harrisburg, we urge caution in policymaking so that we do not end up disadvantaging Pennsylvania manufacturing. Innovation, not higher energy prices, are what is needed to meet our economy’s needs for energy in a sustainable manner. Pennsylvania should be the hub of innovation across all fuel sources – not a place that, because of misguided policy, has such expensive heat and electricity that the next century of advances in technology and energy happen somewhere else.