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No Jobs Without Good Income from Productivity, Chamber Told"
By George NelsonBOARDMAN, Ohio -- Growth in productivity has to be part of the competitive strategy for businesses in the Mahoning Valley, but that means more than just making more products faster, a Cleveland State University professor said yesterday."When we talk about increasing productivity everybody talks about working harder, faster, smarter. It turns out the best way to increase productivity is to increase the value of the products that you sell," said Edward W. Hill, professor and distinguished scholar of economic development at CSU's Maxine Goodman Levin College of Urban Affairs. Hill was the keynote speaker at the Youngstown/Warren Regional Chamber's 2005 Economic Forecast Breakfast held yesterday at Mr. Anthony's Banquet Center.Hill, a nonresident scholar of the Brookings Institution, explained that productivity is the value of goods sold per hour worked. Companies in this region in particular have focused on "working faster, harder and smarter, but your products are becoming more and more like commodities and you're underneath price pressure." Instead, companies need to focus on product innovation"to get your products out from being in the middle of commodity markets," he said."You don't have jobs unless you have good income from productivity," Hill continued. "In Ohio we have to realize that we are going to continue to be in a low population growth environment so what we have to do is increase the value that every one of those workers produces."Hill, who acknowledged long-term economic trends have him concerned, noted that employment, "now a lagging indicator of economic performance," behaved differently during the recent recession than in past downturns. Because of the slow recovery and the amount of international competition, employers have been unwilling to hire new people until their orders books were completely filled, "and we aren't there yet, especially in Ohio," he observed.Employers are also concerned about the unpredictability of health care costs, Hill noted. In addition, people who are laid off are no longer being recalled to jobs as they left them. Instead, those positions are often restructured, with companies purchasing new machinery "and labor is a compliment to that piece of equipment. You have asituation where as one group of workers gets laid off, the job gets recreated in a different way," and the skills for that job change. "The orders have to be strong enough to not only justify hiring a person but to recapitalize the workplace." One challenge facing Ohio, which he said has lagged behind the rest of the country in job growth since the mid-1990s, is a tax code "that is a perfect gateway to the economy of 1934." In particular, Hill called for abolishing the tangible personal property tax, which "gets in the way of people investing in plants and equipment." In its place, he recommended a business tax on corporate industrial land coupled with an excise tax businesses would pay. This would shift more of the burden from manufacturing to the service sector, he said, remarking that doctors and dentists "have been having a hell of an easy time of it" in the state. "This can generate $4 billion worth of revenue. You can get rid of the tangible personal property tax, you can get rid of the corporate franchise tax and get rid of the penny sales tax," he said. Such a move would also help resolve constitutional questions regarding the way Ohio funds education, he added. Another issue the state faces, he said, is that about 30% of Ohio's economy is dependent on auto assembly. "Old domestics" such as General Motors are saddled with large legacy costs -- $1,000- to $1,300 for health care and a like amount for pensions per auto manufactured -- while "new domestics," with defined contribution plans, 401(k)s and the like, have about a $2000 cost advantage per vehicle as a result. Car manufacturers have another $2,000 in costs per vehicle due to state laws that protect existing dealer franchises by preventing the car companies from owning dealerships. "There's going to be a struggle in the next master contract with the old domestics," Hill observed. "They have to get $2,000 worth of cost out of their cars. Are they going to do it through the legacy costs or are they going to do it through the distribution channels? Its going to be a battle royal."Hill also said he is worried about what he characterized as "gaucho economics -- the economics of an Argentinean cowboy" on a national level, running deficits of between 4% and 5% of gross domestic product, and persistent trade deficits.Reporting on the Regional Chamber's current five-year community development program, Pride in Progress, Reid Dulberger, executive vice president, said the chamber assisted 18 companies in 2004, bringing 1,635 new jobs and a cumulative new payroll of $40.2 million, with a fixed asset investment of $56.9 million and 2.77 million square feet of building space constructed or absorbed. While the fixed investment numbers were down somewhat from expectations, Dulberger said the chamber plans to redouble its efforts to work with local manufacturing efforts in expansion projects. In addition, it plans to announce a new partnership "that will help bring state-of-the-art manufacturing assistance services to the Valley to move that number," he said. The chamber has made progress in efforts to bring state and federal dollars to the region and appoint local representatives to public policy boards, continued its emphasis on education and workforce development, and improve the community's image, Dulberger noted.Every dollar invested in Pride in Progress in 2004, he said, has resulted in a return of$135 in new investment, $96 of new annual payroll, $1.64 in state and federal grant money and 6.6 square feet of building space used.Visit the Youngstown/Warren Regional Chamber at www.regionalchamber.comContact George Nelson at [email protected]"