Democrats aren’t the only ones who think Rhode Island’s minimum wage should be higher.

The Rhode Island Senate voted 31-6 on Wednesday to raise the state’s minimum wage from $7.75 to $8 an hour on Jan. 1, which would be the second increase in as many years. Massachusetts’ minimum wage is already $8, while Connecticut’s is $8.25; the federal minimum wage has been $7.25 since 2009.

Among the 31 senators who voted for the $8 minimum were two of the chamber’s six Republicans: Senate Minority Leader Dennis Algiere, R-Westerly, and Sen. Chris Ottiano, R-Portsmouth. They’re not the first Republicans to back a hike; Govs. Lincoln Almond and Don Carcieri both approved increases on their watch.

Two Democrats broke ranks with the rest of their party and voted against raising the wage to $8: Sens. Marc Cote, D-Woonsocket, and Leo Raptakis, D-Coventry. Notably, increasing the minimum wage was not part of Senate President Teresa Paiva Weed’s economic-development package earlier this year.

The Senate bill sponsored by Erin Lynch, D-Warwick, was referred to the House Labor Committee, which held a hearing Feb. 5 on Warwick Rep. David Bennett’s bill to raise the minimum wage to $8.25 next year.

Rhode Island’s first minimum wage was 90 cents an hour in 1956, which would be $7.69 in today’s dollars, according to the U.S. Bureau of Labor Statistics’ CPI inflation calculator. In 2013 dollars, the value of the minimum wage has averaged roughly $8.20 over the last half-century; it peaked at $10.69 in 1968 and bottomed out at $6.79 in 1995. Here’s a chart showing the nominal and inflation-adjusted wage over time:

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s unemployment rate fell to 8.8% in April, reaching the lowest level in four and a half years thanks to a shrinking work force, according to new data released Thursday.

Rhode Island employers added 500 jobs in April, the fifth increase in the last six months. The state would need to add another 29,000 jobs to get back to the peak employment level reached in 2006, which wouldn’t happen until February 2018 if the pace of job growth in April continued.

Read the rest of this story »

A leading real-estate firm says houses are cheap – relatively speaking – in the Providence region.

Home prices in the Providence-New Bedford-Fall River metropolitan area are 13% undervalued relative to the economic fundamentals of the region, significantly more than the 7% undervaluation nationwide and 8% undervaluation in Boston, according to an analysis by Trulia, the real-estate data firm.

Jed Kolko, Trulia’s chief economist, explained the methodology in a blog post:

[W]e assess whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes, and rents. Incomes determine how much people can pay for housing, and price increases aren’t sustainable if they push prices too high relative to incomes. Rents reflect how much people value housing even if they won’t benefit from price appreciation (as renters don’t, but owners do); the price-to-rent ratio is like the price-earnings (P/E) ratio for stocks. Using data from multiple sources … we create several measures of fundamental value and combine them in order to calculate how overvalued or undervalued home prices are relative to fundamentals.

Home prices in the Providence area have fallen a long way since the height of the housing bubble: Trulia estimates prices were 51% overvalued during the middle of the 2000s, while they were 39% overvalued nationwide. (The Providence metro area encompasses all of Rhode Island plus Bristol County, Mass.)

Housing prices are below their fundamental value in 91 of the nation’s 100 largest metro areas, including Providence, according to Trulia. The only places where homes are estimated to be overvalued are in California, Texas, Oregon and Hawaii.

There aren’t exactly a flood of new people arriving in the area to snap up those supposedly cheap houses.

Trulia reports Providence was the sixth-slowest-growing major metropolitan area in the U.S. last year, eking out a population uptick of 0.1%, compared with 3% in fastest-growing Austin, Texas. Providence also has some of the oldest housing stock in the country: 6.6% of the homes for sale in March were built before 1900.

• Related: Study: Cost-of-living in Providence 23% above national average (Feb. 20)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – House Democrats led by Speaker Gordon Fox on Thursday proposed a complete overhaul of the state economic agencies as they unveiled a sweeping set of bills they say will “improve the coordination and quality” of Rhode Island’s troubled economy.

The Democrats’ other proposals include bringing back the tax credit for historic buildings, this time capped at $5 million per project and potentially $30 million in total; allowing employers to pay workers biweekly; considering curbs on the overuse of jobless benefits by seasonal employers; and creating a new tax credit for local employers who add jobs after making major capital investments.

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It’s a tale of two states.

Massachusetts achieved a happy milestone in January, as employment in the Bay State reached 3.31 million jobs – passing the pre-recession peak of 3.3 million reached in April 2008, and meaning Massachusetts has regained all the jobs the state lost during the Great Recession.

“The numbers are really pretty remarkable,” one private-sector researcher marveled to The Boston Globe.

They also offer a grim contrast with the numbers in Rhode Island, which has only regained 8,700 of the 39,600 jobs it lost during the downturn. Put another way, Massachusetts has recovered 110% of the jobs it lost during the recession; Rhode Island has recovered just 22%.

Here’s a chart – Rhode Island is blue, Massachusetts is red, and 100 equals previous peak employment:

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Brown University has received $44 million as a down payment on construction of a new home for its three-year-old School of Engineering, the school announced Wednesday.

Read the rest of this story »

• Related: Watch Newsmakers with Brown U. President Christina Paxson (Nov. 21)

When Twitter and Square co-founder Jack Dorsey appeared on Executive Suite recently, he said the best thing Rhode Island leaders could do to attract more entrepreneurs is to be hospitable to them.

“I think the biggest thing is stating that you want that, stating that you want small businesses, that you want more of them – and not just stating it but showing it,” the billionaire entrepreneur said.

Dorsey argued that “easy paths of starting something” are key. “It’s just taking on that attitude and really showing, not telling, more than anything else,” he said.

Unfortunately, by that standard it seems Rhode Island could hardly be doing worse.

Rhode Island receives a grade of F - the worst in the country – for its overall friendless toward small businesses in a new survey conducted by Thumbtack and the Kauffman Foundation. Only two other states – Hawaii and Maine – got a failing grade. By comparison, New Hampshire got an A+, Massachusetts got a C- and Connecticut got a D+. (Vermont’s sample size was too small to grade.)

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Gary Sasse, the longtime local policymaker who most recently served in the Carcieri administration, is among those who aren’t sure about the idea of providing $40 million or more in state tax credits to convert the Superman building into apartments. Sasse explained his concerns in an email:

The most economically efficient tax policy is one that imposes the lowest possible rates applied on the broadest possible tax base. However, there may be instances were the use of tax policy in the form of credits or tax expenditures can be used to incentivize investment decisions in a way that is not inconsistent with the principles of economic efficiency or capitalism.

For example, if business is provided an R&D or Investment Tax Credit and these credits are available to all qualified taxpayers, one can make the argument that such use of tax policy is not inconsistent with capitalism, recognizing that there is no pure form of any economic system and the value of these tax expenditures should be aggressively monitored.

The type of tax credit that is being proposed for the Superman building does not meet the test outlined above. It is crony capitalism, where preferential tax is being afforded to the politically well connected. This is nothing more then socialism for the well-connected. Any plan to change the use of the Superman building, or any similar project, must be viable to the market or it is bound to fail, regardless of public subsidies.

The resolution of the historic tax-credit plan for the Superman building will tell us a lot – if Rhode Island decision makers are interested in rooting out crony capitalism, a traditional approach to economic development in Rhode Island, a practice of rewarding specific business interest with taxpayer-funded subsidies or largess. Just think of the opportunity costs of our policy of economic development driven by preferential tax treatment.

• Related: Q&A: Dean Baker calls tax deal for Superman building ‘crazy’ (March 28)

The iconoclastic liberal economist Dean Baker is famous for discovering the housing bubble years before better-known economists did so. Baker is the co-director of the Center for Economic and Policy Research in Washington. He visited Rhode Island last week to speak at the Economic Progress Institute’s annual budget conference.

Baker sat down with WPRI.com after the event for a wide-ranging interview about the economic issues facing Rhode Island. (Previous selections discussed the Superman building’s fate and the pension fund’s outlook.) In this section, Baker discusses how he thinks Rhode Island should balance its budget.

The transcript has been lightly edited for length and clarity.

You mentioned in your talk how Rhode Island is like Greece, though you were quick to couch it. I was thinking when I heard you were coming here that one thing I wanted to ask you was, we don’t have a central bank in Rhode Island, we have to balance the budget, we can’t get a looser federal fiscal policy – therefore I’m wondering how to apply what liberals suggest to do for the economy when you get down to a state-level economy. It seems like there aren’t a lot of tools. So when you said Rhode Island is like Greece, what did you mean by that?

Essentially, exactly that. Greece can’t just say, “OK, we’re going to run a big deficit to boost our economy,” because they have to borrow the money from someone, and basically they’re in a situation where the European Central Bank and the IMF are saying, “Here’s the deficits you have to run.” They’re constrained in what they can spend. They don’t have the central bank – the ECB’s deciding what they can do in terms of interest rates, money creation – they don’t have much leeway that way. So the question is, what can you do given those two really big constraints? You can try to do what you can with the resources you have, but you’re basically going in a fight with your hands behind your back because you can’t do the obvious things.

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The iconoclastic liberal economist Dean Baker is famous for discovering the housing bubble years before better-known economists did so. Baker is the co-director of the Center for Economic and Policy Research in Washington. He visited Rhode Island on Thursday to speak at the Economic Progress Institute’s annual budget conference.

Baker sat down with WPRI.com after the event for a wide-ranging interview about the economic issues facing Rhode Island. The Q&A will run on Nesi’s Notes in multiple posts. In this section, Baker offers his take on Providence’s vacant “Superman” building and how to deal with properties like it.

The transcript has been lightly edited for length and clarity.

One of the proposals you presented today was for the creation of a “vacant property tax.” Empty properties are a big problem here, particularly in Providence – what’s the idea with that?

The idea is that to get properties occupied, we want to bring prices down. You have all these people running around and talking like high home prices are a virtue – no, that doesn’t make any sense. I like to joke about the “unaffordable housing policy.” I understand it: I’m a homeowner, I want my house to be worth $1 million.

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By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Several members of the Providence City Council on Wednesday expressed initial support for Mayor Angel Taveras’s plan to freeze the commercial real estate tax for seven years, but said they would seek more details before fully endorsing the proposal.

Read the rest of this story »

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Rhode Island’s capital city would freeze its commercial real estate tax for seven years, offer incentives for developers to build on surface parking lots and redevelop the Kennedy Plaza bus hub under an economic development action plan unveiled Wednesday by Mayor Angel Taveras.

Read the rest of this story »

• PDF: Read Mayor Taveras’s economic-development plan for Providence

When Pope Francis was elected pope this week, he also became one of Rhode Island’s largest employers.

(Sort of, anyway. While Pope Francis is now the leader of the Roman Catholic Church, legally speaking every individual diocese is incorporated as a separate entity. Thus an argument could be made that Bishop of Providence Thomas Tobin is actually the CEO here. Let’s set that aside for now.)

The Roman Catholic Diocese of Providence was Rhode Island’s fourth-largest employer with 6,200 workers as of March 2011, according to data compiled by the R.I. Economic Development Corporation. The only three employers bigger than the Catholic Church were state government (14,904 employees), nonprofit hospital group Lifespan (11,869) and the federal government (11,581, excluding active duty military and reservists).

That said, the diocese’s website claims fewer than 4,000 employees; the EDC says it isn’t able to provide updated data, and the agency has been using the 6,200-employee count since at least 2006.

Still, there’s no doubt the diocese’s budget is significant: its main audit [pdf] listed expenses of $42.3 million in fiscal 2011-12. The document explains, ”The Diocese of Providence is a canonical organization and consists of over 250 separate corporations through which the Roman Catholic Church conducts a portion of its temporal affairs in Rhode Island.” Not all the 250-plus corporations’ expenses are counted toward the $42.3 million.

For more on the economics of the Catholic Church, check out this Economist article.

(h/t: Wonkblog)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – A coalition of political progressives and labor leaders renewed their uphill battle to raise affluent Rhode Islanders’ taxes on Tuesday – but they ran into immediate opposition from Senate President M. Teresa Paiva Weed.

Read the rest of this story »

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Senate leaders led by Senate President M. Teresa Paiva Weed unveiled a wide-ranging package of 25 legislative proposals on Tuesday that the Newport Democrat and her colleagues argue will improve Rhode Island’s anemic economy.

Read the rest of this story »

• Related: Paiva Weed offers her take on turning around the RI economy (Jan. 15)

As you may have heard, Governor Chafee opposed the 38 Studios deal.

After Curt Schilling’s game company collapsed into bankruptcy last spring, Chafee asked for the resignations of every R.I. Economic Development Corporation board member who voted in 2010 to approve the company’s $75 million taxpayer-guaranteed loan.

Nearly all the members complied in one way or another, with one noteworthy exception: George Nee, president of the Rhode Island AFL-CIO and the leading voice of organized labor in the state. Nee didn’t resign and continued to attend board meetings despite Chafee’s request.

And on Thursday it was Nee – not Chafee – who got the last word: the governor just nominated the union leader for another term on the struggling board, along with four other new members.

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​By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s unemployment rate inched down in January to the lowest level in four years as the state’s work force continued to shrink, new data released Thursday shows, but employers in the state added jobs for the third straight month.

Read the rest of this story »

• Related: RI has lost 10% of its prime working-age population since 2006 (March 4)

Rhode Island’s unemployment rate was the highest in the United States in December, and it would have been even higher if tens of thousands of residents in the prime of their working lives hadn’t decided to leave the state during and after the Great Recession.

One of the alternative ways economists check the health of the job market is by looking at the employment status of “prime-age” adults – defined as those between the ages of 25 and 54. Those are the years when most people are focusing on their careers, raising families and saving for retirement. Looking specifically at 25- to 54-year-olds also allows analysts to look past changes caused by demographic shifts as the baby boomers age.

The prime-age numbers for Rhode Island are striking and worrying: excluding soldiers and institutionalized individuals, the state’s civilian population ages 25-54 plunged by 46,000 between 2006 and 2012, a drop of 10% in just six years, according to the Bureau of Labor Statistics. Among those who remained, the share with a job dropped by 16% and the number of unemployed more than doubled.

Here’s a chart:

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There was understandable relief Thursday following the announcement that Rhode Island’s unemployment rate has fallen below 10% for the first time in nearly four years. But it’s not the full picture.

On Friday, the U.S. Bureau of Labor Statistics released another statistic about Rhode Island’s job market: the employment-population ratio, which measures how many people have a job out of all the state’s residents ages 16 and up who aren’t in the military or behind bars. The news wasn’t good.

Rhode Island’s employment-population ratio in 2012 was 59.4%, basically unchanged from 2011 – when it dropped to a new low. As recently as 2006, when employment peaked in Rhode Island, the employment-population ratio was 65%. Here’s a chart showing what’s happened:

Long-term unemployment can do long-term damage to those who are out of work for an extended period of time, so it’s unclear how long it will take for Rhode Island’s employment-population ratio to recover to its 2006 level (assuming it does eventually).

This helps demonstrate why experts caution against looking solely at the unemployment rate – it can fall because people give up on looking for work or drop out of the labor force for other reasons, which aren’t signs of healthy job growth. As for the jobless rate? Rhode Island’s 9.9% was the nation’s highest in December.

• Related: How high unemployment changed where Rhode Islanders work (March 1)

There was welcome news on Thursday that Rhode Island’s unemployment rate is now below 10% for the first time in nearly four years. But the Great Recession had a huge impact on where the jobs are in the state.

The only industry that added a significant number of employees from 2007 through 2012 was education and health services, which is primarily nonprofit and heavily dependent on government subsidies, and which added 5,700 jobs. By contrast manufacturing – which started with half as many jobs as education and health to begin with – was still down by 11,600 jobs as of December.

Here’s a chart showing the change in total Rhode Island employment by industry:

And here’s a more granular look that breaks out some of those large categories into smaller ones. Health care and social services, for example, employs the bulk of folks in the Education & Health Services sector above, while retail is the primary employer in the Trade, Transportation & Utilities category:

​By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s painfully slow economic recovery hit an important symbolic milestone in December, as the jobless rate fell below double-digits for the first time in nearly four years, new data released Thursday shows.

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By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Florida Gov. Rick Scott sent a personal letter to a Rhode Island hedge fund manager in an attempt to convince him to move his business to the Sunshine State, WPRI.com has learned.

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​By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s economy is being held back by problems that include relatively high taxes, a maze of regulations, too many dropouts and a lack of funding for startups, according to a new study commissioned by the Chafee administration.

Read the rest of this story »

• Related: Read the full Fourth Economy Consulting study of Rhode Island (PDF)

Rhode Islanders pay a significant premium to live here.

The cost of living in the Providence metropolitan area was 23% higher than the national average last year, according to the latest index from the Center for Regional Economic Competitiveness. That made Providence the 25th-most expensive U.S. jurisdiction out of about 300 examined by the Virginia-based research group, data provided to WPRI.com shows.

The country’s most expensive places were Manhattan (125% above average), Brooklyn (79%), Honolulu (67%), San Francisco (63%) and San Jose (57%); the cheapest were Harlingen, Texas, and Norman, Okla. The costliest metropolitan area in New England was Bridgeport (46% above average), followed by Boston (40%), New Haven (28%), Hartford (24%) and Providence.

Here’s how the Center’s Dean Frutiger describes its methodology:

The composite index numbers is composed of the six individual component categories, groceries, housing, utilities, transportation, medical care, and miscellaneous. Each of the categories has a weight attached to it, respectively, 13.56, 27.02, 10.30, 12.35, 4.60, and 32.17. These numbers represent the percent of average annual income spent in those categories by a professional/managerial household. The composite index number therefore, is composed of 13.56% of the grocery index, 27.02% of the housing index, etc.

Housing is the category where Providence-area residents pay the biggest premium, 32% more than the national average. They also pay 29% more for miscellaneous goods, 27% more for utilities and 17% more for health care, but only 5% more for transportation.

Metro Providence’s high costs were a big topic recently on Executive Suite with urban expert Aaron Renn. (more…)

Rhode Island’s Future editor Bob Plain highlighted a new San Francisco Fed paper that argues “the decline in state-level employment is strongly correlated with the increase in the percentage of businesses complaining about lack of demand,” and “there is no evidence that job losses were larger in states where businesses were more worried about these factors” – important points about the relationship between taxes and job growth.

However, the paper includes a specific data point about Rhode Island that’s also worth highlighting. The number of Rhode Island businesses citing regulation and taxes as their top concern jumped by more than 30% between 2008 and 2011, significantly more than in any other state:

The Fed paper’s main conclusion – that state-level employment dropped during the recession mainly due to a lack of demand, not a new fear of taxes and regulations – is an important finding for the debate nationwide. But what the survey data shows – that Rhode Island’s business owners have grown more concerned about taxes and regulations than their counterparts anywhere else – is an important finding, as well.

It’s vital – and too rare – that outside research gets brought to bear on the policy debate in Rhode Island. But it’s just as important that Rhode Islanders try to figure out why their state’s economy keeps lagging behind those of neighboring states, not to mention the nation’s.

• Related: Josh Barro on why RI’s economic problems are so intractable (May 4)

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – A Providence-based startup founded by one of the state’s most successful technology entrepreneurs has been named one of the “America’s Most Promising Companies” by Forbes Magazine.

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• Related: Watch Angus Davis discuss Swipely on Executive Suite (Dec. 27)

Rhode Islanders pay the 13th-highest state and local taxes in the country compared with their incomes, according to the latest analysis of Census data by the Massachusetts Budget and Policy Center.

The $6.9 billion in state and local taxes paid by Rhode Islanders in 2009-10 totaled 11.1% of their personal income, up slightly from 11.0% the prior year, the analysis shows. Just 12 other states took more of their residents’ income in state and local taxes, according to the group.

The national average was 10.6% of income, and Massachusetts ranked 25th at 10.2% of income, the analysis shows. Three other New England states – Maine, Vermont and Connecticut – took more of their residents’ incomes in taxes than Rhode Island did, while New Hampshire took the least.

The left-leaning Massachusetts think tank said it looks at taxes as a share of personal income rather than per capita because it “allows for a meaningful comparison among states.” Another group, the right-leaning Tax Foundation, ranks Rhode Island’s tax burden higher after making adjustments to the data.

• Related: Charts: Regressive RI taxes getting (slightly) more progressive (Jan. 30)

(chart: Massachusetts Budget and Policy Center modified by WPRI.com)

For more than a decade, state and local taxes in Rhode Island have been among the nation’s most regressive – meaning they’re structured to take a larger share of income from the poor than they do from the wealthy.

That said, a WPRI.com analysis of the last decade’s “Who Pays?” studies from the Institute on Taxation and Economic Policy shows the richest Rhode Islanders are paying slightly more of their incomes in state and local taxes than they were in 2002, while the poorest are paying a bit less.

That doesn’t necessarily contradict progressives’ argument that wealthier Rhode Islanders have gotten a tax cut: the studies show the share of income paid by the top 1% in income taxes fell from 5.8% in 2002 to 4.8% in 2013. But that reduction was offset by an increase in how much the top 1% paid in property taxes, which rose from 2% to 3.1%. Here’s how the tax mix for the top 1% has changed over the last decade:

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