Oregon: State of Wonder, or State of Failure?

Oregon’s license plates once read: “Pacific Wonderland.” Crammed into our great state are rain forests, deserts, mountains, plains, large cities and one-road towns. We also have one national park and a few volcanoes. It’s possible to wake up in your home in Portland, hop in your car, surf Seaside in the morning, ski Timberline in the afternoon and be home in time for a not-too-late dinner.

But there’s a dark side to our State of Wonder. While surfing the Oregon Coast, a high school student is ditching school. While skiing Timberline, an unemployed worker has given up looking for a job. In many ways, our State of Wonder has turned into a State of Failure.

It does not have to be that way. In 1986 Oregon’s graduation rate was slightly higher than the national average. Back then, Oregon schools graduated three out of four high school students. Fast-forward: In 2014 the U.S. Department of Education reports, national graduation rates had improved by 10 percentage points to 82%. By contrast, Oregon’s graduation rates stagnated. At 72%, Oregon has one of the worst graduation rates in the country.

Oregon’s unemployment rate is 4.8%, just below the national average. This spot of good news belies the fact that over the past 30 years, Oregon has frequently been in the top 10 for having the highest rates of unemployment. The most recent data show that Oregon has the highest rate of workers who want a full-time job but cannot find full-time work.

The Bureau of Labor Statistics reports more than one in four Oregonians ages 16 to 19 are unemployed. That is eight percentage points higher than the U.S. average for the same age group. It was not always this way. Throughout the 1980s and early 1990s, Oregon’s youth had roughly the same employment prospects as the rest of the U.S.
 
The Kauffman Foundation ranks Oregon in the bottom third of states for startup activity, dropping three spots from last year. These findings are backed up by state economists who find that the number of new businesses in Oregon on an annual basis is proportionally lower than at any point since the mid-1970s.

Entrepreneurs can be placed in two broad categories: (1) those who start a business because they see market opportunities, and (2) those who start a business because they cannot get a job. Oregon has one of the highest rates of new business owners in the second category, according to Kauffman.

Even worse, state and local governments are increasingly treating business activity as a messy yard that must be aggressively weeded rather than a wildflower garden that should be allowed to bloom. Recent legislation on the minimum wage and paid time off, and anticipated legislation on scheduling employee working hours, are just a few examples of burdensome and expensive regulatory micromanagement. The massive tax increase heading to the November ballots will virtually guarantee that no small business in Oregon will become a big business in Oregon.

If Oregon made it as easy to start and grow a business as it does to get food stamps or go on Medicaid, we’d be a state of Nikes and Intels instead of a state of unemployment and underemployment. If Oregon made it easy to hire employees, we would lose our reputation as the place young people come to retire.

As those nascent Nikes and Intels expand, people looking for work will get jobs. When students see that staying in school pays off in the form of better jobs and better pay, they will choose to graduate. When growth is encouraged, new businesses will jump at the opportunities to build a better mousetrap.

We’ve seen this solution in action and it works. The recession of the 1980s hit Oregon hard. The Reagan recovery came late to Oregon, but it came nonetheless. The spotted owl tried to snuff out the Reagan recovery, but the dot-com boom brought a level of prosperity the state had not seen since after World War II. During this miniboom, graduation rates stabilized, unemployment was better than average and Oregon’s labor force participation was above the U.S. average.

Portland author Chuck Palahniuk, in his book Fight Club, says, “It’s only after we’ve lost everything that we’re free to do anything.” But we don’t have to lose everything. We simply need to unwind those regulations that snuff out initiative and punish progress. If the state steps back and lets people strive and thrive, Oregon will truly be a State of Wonder.
 
Eric Fruits is president and chief economist at Economics International Corp.


Counterpoint

By JOE CORTRIGHT

Oregon’s economy is enjoying its strongest performance in almost two decades. You’d have to be deeply pessimistic to see the dark side here. We’re currently growing jobs at a 3.3% rate — the fastest in 20 years. The region’s unemployment rate tumbled to 4.5% in March, the lowest mark since comparable record-keeping began in 1976. And it turns out that Oregon is exceptionally good at creating new businesses  —  not to mention growing existing ones. According to the same Kauffman Foundation that Fruits cites, Portland ranks second nationally in the rate of business ownership per capita, and fourth or fifth in what they call Main Street businesses. These kinds of measures matter, as Harvard economist Ed Glaeser has shown, because broad-based measures of small-scale entrepreneurship are strong predictors of subsequent economic growth.

But it isn’t just small businesses. Intel and Nike have added thousands of employees each in the past few years and are now both reporting historic highs in local employment (Intel, 19,500; Nike, 8,700).

We know variations in educational attainment explain about 60% of differences in economic prosperity between places. But the worn-out claims that Oregon’s innovativeness, entrepreneurship and job growth are being throttled by excessive regulation just don’t hold water. In this recovery, statewide growth has been driven by businesses in the City of Portland — that supposed pariah of big government. Metro Portland has chalked up the second fastest job growth of any large U.S. metro in the past year.

The reason: Talented workers and firms that employ them increasingly want to live in urban environments with a great quality of life. FYI: The DMV is again issuing Pacific Wonderland plates. perhaps because the description still fits.

Joe Cortright is a principal economist with Impresa.

1 comment

  • Linda
    Linda Thursday, 05 May 2016 10:33 Comment Link

    Is Mr. Fruits living in an alternate universe? The old adages harking back to Reagan are not only hoary, they are not accurate. Guess some people insist on seeing the glass as half full, even when it is spilling over the top.

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