WashACE Blog

More Misleading Data on Workers' Compensation from the State Labor Council

Yesterday the Washington State Labor Council released the second in its (hopefully brief) series, "Outside the Echo Chamber." Misleadingly entitled, "Our state's workers' comp advantage," the piece relies exclusively on a report published routinely by the state of Oregon to benchmark that state's workers' comp system against the rest of the nation. While it may be useful for Oregon policymakers, it simply has no utility here, as we've noted several times in the past. 

Bear with me: This is worth expanding on. Although the WSLC links to the executive summary of the report, purportedly to show that Washington's premiums are among the nation's lowest, the full study goes out of its way to show that the rankings cannot be used that way. 

In particular, download the study and read the brief section (pages 10-12) headed "notes about using the rankings." The analysts write:

1. Because the study does not include all premium classes, the actual average premium rate for a state may differ from the weighted premium rate index, which is based on the characteristics of Oregon’s economy.  

<snip>

7. The premium rates do not reflect any dividends paid to employers.

8. The data exclude self-insurers’ experience. 

9. This study is based on payroll rates.

For Washington, hourly rates had to be converted to payroll rates. The Washington payroll data included overtime pay that may overstate the average wage for purposes of premium computation, thus understating the effective average payroll rate. (emphasis added)

This quickly gets tiresome, because we've explained all this before. 

This and That: I-1033, Hydro in I-937, Great Health Care Videos, and More

I spent most of the last two days at a meeting of the Western States Petroleum Association, a good WashACE supporter. Here's a bit of catching up on things we've posted on previously...and some new stuff.

New:

• In this Puget Sound Business Journal Column I take a look at Initiative 1033, a revenue cap that promises property tax relief. Read it and let me know what you think. 
• There's a lot of talk about taxing the rich to pay for new federal programs. That makes this new Tax Foundation report particularly timely. 

The top 1 percent of tax filers earned about 22.8 percent of the nation's income in 2007 (the latest IRS data available), and paid 40.4 percent of all federal income taxes - more than the bottom 95 percent of tax filers combined, according to a Tax Foundation analysis of just-released IRS data.

Ongoing:

• It looks like health care reform may be slowing down in Congress. That's a good thing. The News Tribune editorial board points out this morning that good health care law won't expire like milk. This post from The Heritage Foundation should erasie any lingering doubt about the importance of taking the time to get it right. 
• Worth a special health care bullet is this excellent video series from the Washington Policy Center. The WPC managed to break down the complexities, bring out important information, and do it in a compelling and concise manner. Great work.
• In an earlier post on the challenges facing renewable energy, I linked to a seattlepi.com story citing Speaker Frank Chopp's support of including hydro as a renewable under the definitions of I-937. In a sharp editorial today, "We're not Las Vegas - say it here, be heard there," the Tri-Cities Herald challenges the Speaker's attempt to distance himself from the remark.
• The Seattle-Charleston connection, something I wrote about here, gets a nice treatment in this Puget Sound Business Journal post. The two metros have more in common that you think.

Green Jobs and Productivity

In Econbrowser, James Hamilton puts green jobs in perspective, citing his own quote in this article from the North County Times (California). The whole article's worth a read. Here's Hamilton's contribution.

Skeptics of the economic benefits of alternative energy sources say the proper way to consider them is by how much energy is created per worker. That is a direct measure of productivity, said James Hamilton, a professor of economics at UC San Diego. The more energy created per worker, the better for the rest of the economy.

Hamilton specializes in macroeconomics and econometrics, the field of quantifying economics. He also is noted for his research on oil prices.

"If you have two people making the same amount of energy that one person used to make, would you want to describe that as creating one new job?" Hamilton asked. "I would say no, you're significantly reducing productivity. Ultimately, creating jobs has to do with promoting productivity."

Right.

Missing the Brass Ring in Education

As the governor lobbies for more money from the Obama administration, as reported yesterday by the Seattle Times' Andrew Garber, the probable loss of education assistance must smart. That second link is to a good editorial in The News Tribune this morning. The feds are distributing some $4.3 billion to states that demonstrate excellence in public education. The editorial looks at some criteria:

Essentially, a state would have to demonstrate that it can implement successful, student-focused reforms in the face of political obstacles, hidebound K-12 establishments and teachers unions.

Some of their core expectations:

 • A state must connect data on student performance to individual teachers. The logic for this is blindingly obvious: The data connection can not only help evaluate teachers, it can help evaluate the curriculum they use, the schools of education that trained them and the effectiveness of their principals.

The failure to make that connection cripples accountability all around. Washington doesn’t make it.

 • A state must reward high-performing teachers. For the most part, Washington does not.

 • A state must encourage educational innovation by not imposing a cap on the number of charter public schools – schools commonly organized and self-governed by teachers and parents. Washington imposes a cap: zero.

 • A state must have a credible way of stepping in and fixing failing schools. Washington doesn’t.

Not good. Also in The News Tribune is Education Secretary Arne Duncan's challenge to the nation's governors.  See also this post by Jason Mercier at the Washington Policy Center.

Being A Competitive State

In my column in today's Everett Herald I expanded on a couple of themes from last week's blog posts: the AG's opinion that the worker privacy act is preempted by federal law and the WSLC's interest in competitiveness rankings.

Increasingly, I believe the "best states" ratings gimmicks used by think tanks and magazines mislead more than they inform. As I wrote in this Washington Business column, there's no way to identify a single best business climate for all businesses. But folks keep trying, with greater or lesser degrees of success.

Typically, the more specific the analysis, the better. Industry-focused research, like the BSU manufacturing study, will generally be better at capturing relevant information than a general business climate assessment. Academic research is more credible than most media analyses because of the value universities place on transparency and peer review. While data and statistics matter, so do the perceptions of site selection and economic development consultants.

Finally, because conditions vary dramatically within a state, metro-area reports are often more useful than statewide reports. State policies matter most when we consider how they influence business costs and labor markets. 

Today, however, I suggest that one way we can improve the business climate for all businesses would be to take the pernicious, unconstitutional and unnecessary Worker Privacy Act off the table. (Kris Tefft's post at Olympia Business Watch explains the history of the legislation further.)

And here's a link to the Gary Becker blog post I cite in the column. It's a good read.

Renewable Energy Efforts Face Stumbling Blocks

A couple of news stories point to ongoing problems we'll have in meeting our renewable energy objectives. Yesterday's Puget Sound Business Journal reports that financing remains elusive for solar energy.

"The weak supply of tax equity combined with heightened credit requirements has led to numerous project cancellations and delays nationwide, with over 75 [megawatts], totaling $450 million, of idle projects in New Jersey alone," Pike industry analyst George Kotzias said in a statement. "But the tide is beginning to turn as evidenced by Wells Fargo and U.S. Bancorp -- both of which have established tax equity funds for solar projects."

A little good news in seattlepi.com's report that House Speaker Frank Chopp, D-Seattle, supports nuclear energy and classifying hydropower as a renewable under Initiative 937. Nuclear may have to wait awhile, though.

Chopp predicted that nuclear power will be part of the solution to America's dependence on foreign oil, according to a report by the Tri-City Herald.

But first, he said, public attitudes must change.

And then there's this story in the Columbian saying a wind power project in Pacific County may be shut down because it threatens the endangered  murrelet. (This one stumped me for a second, but then I realized I'd misread it and thought it said mullet, which is't nearly endangered enough.)

Wrapping up the energy roundup, bad news in California as Shopflor.org writes that environmental activists have managed to block Chevron's refinery expansion at the cost of 1,000 construction jobs. 

The project would install new technology and reduce emissions, but groups like Communities for a Better Environment cannot accept any successful energy operation.

It does look that way.

Federal Health Care Reform Still Doesn't Pencil Out

Stanley Greenberg's article in The New Republic nicely compares this year's health care reform debate to the failed (mercifully) 1993 effort. Greenberg, a close Clinton adviser and pollster, recounts how the Clinton plan foundered under unresolvable questions of cost and complexity.

Going back into the field, Greenberg posed again the questions he'd asked of voters sixteen years ago. And found that public opinion has changed little.

Our inability to talk credibly about how we would reduce health care spending or costs for individuals and the country built a contradiction into all our efforts--the more we talked about the comprehensiveness of our plans, the more voters worried this would yield higher premiums or higher taxes. Very quickly, voters came to conclude that their families would face higher costs.

And those dynamics are still in play. In my recent polling, I found that voters are skeptical about claims that reform will reduce costs and personal health outlays. Claims about simplicity, information-technology modernization, and best practices don't seem to be enough to persuade them otherwise.

He believes public resistance can be overcome. Read the article. It's going to take more than speeches and models to get past the reasoned resistance of consumers to increased government control.

Particularly when you look at numbers like these;

For the second time in less than two weeks, the independent and non-partisan Congressional Budget Office (CBO) has dealt a crushing blow to President Barack Obama’s health care plans. First, on July 17th, CBO director Doug Elmendorf sent a letter to House Ways and Means Chairman Charlie Rangel (D-NY), explaining that, in direct contradiction to President Obama’s promise that his health plan would not add even one dime to our deficit over the next decade, the House health plan would actually increase the budget deficit by $239 billion over ten years.

In Commentary, Jennifer Rubin clearly sums up the current problem for would-be reformers.

ObamaCare, far from reducing health-care costs and the deficit, increases them — dramatically and with no funding source identified to pay for the expansion. As Yuval Levin puts it: “This makes the ongoing<br>mad dash to find a way to make the bill look deficit neutral within a 10-year budget window seem silly.” We would in fact be setting off a time bomb within the already imploding federal budget.

So far, the countermove from the administration and Congressional leaders is to challenge the estimates. Good luck with that. Rasmussen Reports finds that just 23 percent of us believe health care costs will go down if reform passes Congress.

CNBC Rates "Best States for Business" - WA Ties for #16

Just yesterday I wrote about this whole business of rating states. Then along comes another rating (h/t Jocelyn McCabe). This time, CNBC assesses the 50 states on ten criteria: GIve the group credit for a fairly transparent process, although the weighting scheme strikes me as a bit odd. 

Here's how Washington fares:

Category	Score	2009 Rank	2008 Rank
Cost of Doing Business	200	32	35
Workforce	147	35	37
Quality of Life	227	11	9
Economy	130	18	11
Transportation & Infrastructure	92	30	22
Technology & Innovation	208	6	6
Education	96	18	17
Business Friendliness	60	37	34
Access to Capital	46	5	5
Cost of Living	8	34	36
OVERALL	1214	16	18

See what I mean? The ratings are somewhat what you might expect - high on quality of life, technology & innovation, and access to capital; lower on cost of living, cost of doing business, and business friendliness. But then some odd outliers. For example, I thought workforce was supposed to be a strength here. Not according to CNBC.

Moreover, how is it that cost factors appear to be so lightly weighted? One clue might be in this statement.

We weighted the categories based on how frequently each is cited in state economic development marketing materials.

Given that I've never been anywhere that didn't tout it's quality of life, that might explain how we bumped up a bit. Odd.

Oh well. It's more data. And our friends at Shopfloor.org like it.

Attorney General McKenna Says Federal Law Preempts State Worker Privacy Act

At Olympia Business Watch, Kris Tefft has a good post on yesterday's release of the official Attorney General Opinion on the state Worker Privacy Act. Rather than rehash it here, I strongly encourage you to read the post and the opinion.

Now that the Washington State Labor Council has joined the effort to make this a better place to do business, maybe they'll scrap their ill-advised attempt to have the legislature adopt this unconstitutional law..

State Labor Council Celebrates Washington's Friendly Business Climate. Really.

WashACE, along with many business groups, has labored long to improve the state business climate. So we're delighted to have the Washington State Labor Council come along to tell us we've been doing a good job. Well, that's not exactly it. Their take, announced in the first of a special series of reports called "Outside the Echo Chamber," seems to be that because a number of think tanks, magazines, and economic development outfits rate Washington as a good place to do business, we should stop talking about what we need to do to improve.

I encourage you to read the cleverly written piece. It even begins with a nice bit from back when Al Franken was intentionally funny (the good old days). Report author David Groves, riffing on the self-help schtick from Franken's Stuart Smalley bit, argues that Washington's political leaders need to get over their insecurity and recognize what a gosh-darned business friendly state this is. Specifically,

Stop believing the politically motivated, demonstrably untrue rhetoric within the state that suggests this is a bad place to do business.  Start looking at what national business publications and public policy organizations -- which don't have an agenda or vested interest in the outcome -- are saying about us.  And finally, work together to build on our considerable business-climate advantages to make Washington an even more attractive place for businesses and industries.

OK. I agree with that last sentence. And, contrary to the convenient straw man the piece relies on, we don't argue that "this is a bad place to do business." As I've written before, I don't put much stock in national "best place" ratings. I expand on the theme in this 2007 column. To the extent that they're useful, they offer us a glimpse of the factors some folks think are important.The components of the constructed indexes are generally more informative than the headline rankings, which are always artificial.

And, of course, the notion that major public policy organizations "don't have an agenda" is touchingly naive. For example, the Small Business & Entrepreneurship Council and the Tax Foundation - the two groups the WSLC cites on business taxes - routinely stack the decks against states that have an income tax. The way they construct their business tax climate rankings, as we've written before, reflects their bias. The Washington Research Council examines the issue in some depth in this 2003 report. (The indexes have changed somewhat, but without fundamentally altering the results or the biases.)

For some reason, the labor council doesn't see the value in looking beyond the headlines. Our efforts to understand better the rankings is dismissed this way.

Meanwhile, with every new positive assessment of our business climate, state business groups go into "damage-control" mode by picking apart each study's methodology and explaining why these national groups just don't understand the unique burdens state and local governments place on businesses in our state.

As if the businesses we want to retain and recruit don't have the capacity to pick apart the methodologies and understand the "unique burdens" of locating here.

Well, there are some folks who think business doesn't understand the risks and rewards inherent in location decisions. John Burbank, for example, writes today that Boeing just doesn't understand why South Carolina would be a bad place to go. I, too, want the company to put its second 787 line here. If they do, it won't be because someone tosses out offensive and dated references to the old Confederacy to put down an aggressive and qualified competitor.

If what the WSLC wants is a realistic assessment of the costs and benefits of doing business in Washington relative other states and nations, we agree. In this Washington Business column, we look at the rankings game.

In the Redbook, published by the Washington Alliance for a Competitive Economy, we include 54 separate ranking tables ranging from business taxes to science and engineering doctorates.

Washington Research Council economist Kriss Sjoblom, who guides production of the Redbook, says, "Too often, the main goal of index authors is to grab headlines or sell magazines rather than to provide guidance to policy-makers." We prefer to give people the data and let them draw their own conclusions.

That same column reviews some extensive research done by Kansas Inc., that state's economic development group. Here's the conclusion:

In the end, after all the sophisticated data analysis, the KI study concludes: "The most important elements of business climate appear to be tax and regulatory burdens imposed on firms." In other words, the bottom line is still the bottom line.

And the details still matter.