MAZZE

The outlook for jobs for the remainder of 2008 is bleak. For March, the Rhode Island Department of Labor and Training announced a decline of 3,100 jobs, which increased the state’s unemployment rate to 6.1 percent. This is the highest unemployment rate in the region and the highest unemployment rate in Rhode Island since August 1995. In February and March, employment losses were reported in almost every industry sector in the state. It currently looks like no new net jobs will be created in Rhode Island in 2008.

What is going wrong? There are at least three things: (1) The subprime mortgage crisis and credit crunch caused Rhode Island to be among the first to enter a recessionary period; (2) The confidence of consumers and businesspeople is so low that consumers are not buying and businesses are not hiring or spending; (3) The state’s economic development program is not accomplishing the objective of a job for every worker.

The solutions include making Rhode Island more fiscally responsible and job creation the focus of Rhode Island’s economic programs. The graduating class of 2008, as in past years, will have to seek employment in other states since there will be few jobs in Rhode Island available to them.

In recent years, there has been more job destruction (jobs lost due to business contraction, closure or out-migration) than job creation in Rhode Island. The net job-creation rate has been the highest among smaller businesses, while it has been negative at larger businesses.

I am recommending that the Rhode Island Department of Labor and Training begin reporting regularly a job-creation rate, a job-destruction rate and a net employment-change rate. The job-creation rate is the total number of new jobs created by new businesses or added at existing businesses divided by the state’s total employment, and a job-destruction rate is the total number of jobs that were destroyed by either closing or contracting firms divided by the state’s total employment. The net employment change equals the job-creation rate minus the job-destruction rate. This is a more transparent way to look at economic progress in total employment.

Since Rhode Island’s business community plays a reactive rather than proactive role in economic development, it becomes more important for state government to create the environment through legislation and tax policies that will attract and retain businesses. The agencies of state government need to eliminate the barriers that make Rhode Island a difficult place to do business. A small-business advocate in each state agency would help resolve contracting issues and lead to more small businesses obtaining state government contracts.

The objective is to make the state business friendly. This goal can be accomplished by a sweeping reform of the state’s tax policy, changing those policies that slow down business activities such as permitting, and changing legislation and policies that prevent individuals from entering specific trades by requiring long-term apprenticeships. Rhode Island must continue to develop a one-stop place for businesses to go for permitting, tax information and support services to create less red tape.

Although the state supports high-tech and other high-paying industries by offering incentives, the state would be foolish to abandon the traditional employment sectors that have created the jobs in Rhode Island. The state should offer job-creation incentives for any business sector that creates new jobs and give priority to Rhode Island businesses when awarding contracts for goods or services, particularly during these tough economic times.

More attention needs to be placed on education improvement so that the state can provide a skilled work force that will attract new jobs and promote expansion of existing industries. An immediate economic stimulus would be for the state to invest in construction activities that will improve roads and bridges — leading to better roads and bridges as the result of this investment. This activity could create more than 1,000 jobs over the next three years. This can be done by refinancing existing debt and bonding to take advantage of lower interest rates, assuming the state balances its budget. The fiscal 2009 budget should contain no new programs without a way to pay for them and no new taxes or fees along with significant cuts and reforms.

The state needs to expand tourism promotion as a way of business marketing. An investment in tourism may bring individuals to the state who may then consider Rhode Island as a place to locate their business. Local government needs to invest in making their Main Streets more friendly and attractive to retailers and customers. The downtown areas of many communities need to be dressed up. Rhode Island is strategically located to attract and retain businesses if we can work together to achieve this objective.

Edward M. Mazze is distinguished university professor of business administration at the University of Rhode Island