OP-ED | The Economics of People, Part III
This op-ed is the third in a three-part series advocating for a public/private strategy that promotes greater economic inclusiveness and productivity for all Connecticut citizens. Links to the first two articles can be found below.
While “The Economics of People” is not exactly a scintillating headline, I stand by the importance of the concept.
Central to economics is the productivity of human beings. In fact, some really smart people that are more boring than me (imagine) have defined economics as the study of human behavior. The more we encourage productive human behavior, the healthier our economy and the communities in which we live. As a state with a constricting economy, increasing per capita debt and increasing need for social services, we need to make our citizens more productive. Greater productivity means more revenue and less expense.
Do we — and I mean both the public and private sector — do enough to promote the economic productivity of our citizens? I do not think so. In Part I, I proposed that we need to maintain the size of government for simple economic reasons, with the caveat that government needs to be more productive. In Part II, I said we need to tolerate — and encourage — more active cooperation between the public and private sector. The private sector is concerned with productivity. This is what they do and how they eat. Now, I will say that we need to learn how to honestly measure our public investments — all of our investments — from an economic perspective so we focus on what works and squash what is ineffective. (In a never ending effort to defeat insomnia, I have also written on the topic of measurement.)
A strategy that seeks to improve the economy of a state by encouraging productivity is not an unrealistic endeavor. The good news is that there is no need to reinvent the wheel because our country is gradually turning its focus to the economic value of productive human behavior. While perhaps a little dry, the topic is easy to understand and there is a wealth of information.
The “solutions” center on increasing the productivity of populations that are costing our state money. Programming that prepares our poorest urban populations to enter the workforce in a meaningful manner can have enormous economic impact. These programs are well known and focus on education (early childhood for children, job-related for adults) and general workforce development (public/private partnerships like the present Step Up program from the DOL) .
The design and delivery of programming that increases productivity needs to go hand-in-hand with the measurement of our public investments. The ideas of productivity, return on investment, and measurement are inseparable. Like I mentioned in my last piece, this is where the private sector can be invaluable. It is what they do.
We need to examine all of our public investments for an appropriate return. For example, at $300,000 annually for juvenile justice and $50,000 for adult incarceration, we should make sure that only our most dangerous enter the criminal justice system. This is because both the direct and collateral costs are so extraordinary. Collateral costs? Yes. It is no secret that involvement in the criminal justice system results in extraordinary collateral costs for individuals and families. In many cases, a steady job and affordable housing would be an appropriate response, and the economic impact — from cost-negative to cost-positive — would be enormous. The cries for juvenile justice reform that have been heeded in recent years in our state, and which are now being expressed on a national level by U.S. Sen. Chris Murphy, use this type of financial analysis to truly resonate.
Would a real return on investment analysis justify an over 900 percent increase in state retiree healthcare costs as recently highlighted by a CBIA report? Hard to see how it could.
The most effective social service program is a vibrant and inclusive economy. There is no difference. Many of the leading economists in the world teach at the University of Chicago and are members of the Human Capital and Economic Opportunity Working Group. This is a remarkable global working group looking at how the environments in which people live are a direct determinant of a productive economy.
It is not a secret that our urban areas are intense cost centers. Unemployment and under employment have created generational poverty that gives rise to great financial and human cost. Meaningful economic development within our cities would have an enormous financial impact on our state.
Approximately 60 percent of our state budget is tied to the delivery of social services. During the past 20 years, there has been a 45 percent increases in our state’s population deemed to be very poor, as reported by Connecticut’s own network of Community Action Agencies. Of the 169 towns in Connecticut, 131 cited an increase. The report states that this population is now bleeding outside our cities into our rural areas as well. Our public investments need to address the issue more effectively. Perhaps we are addressing need, but we simply cannot be addressing causes. Not with these numbers.
The lack of a strong private sector jobs market has far reaching consequences. Two obvious consequences are an increase in social service needs and a decrease in state revenue. A less obvious consequence is an unwillingness to embrace new approaches because the status quo is associated with existing and valuable jobs within government and the nonprofit sector. As I argued in my first piece, tell everyone in government that the jobs are safe, just different. Work with the private sector to design programming that increases economic productivity and we will ease fiscal pressure. Then measure and measure again.
We are a nation obsessed with rankings. Whether it’s college football or the best towns of Connecticut, we are addicted to the shame or glory of being one of the best or worst. Unless you live in a cave, you may have noticed that we are not doing well in the economic rankings game. I am reluctant to highlight the statistics or reports that address our state’s economic challenges. This usually prompts responses that say Democrats or Republicans are responsible.
Let’s simply work together to increase economic opportunity for everyone. An inclusive and vibrant economy generates revenue and decreases need. Each year, less revenue is being met by more expense. As a long-term strategy, this is unsustainable. To address the revenue side of the equation means we need to focus on substantially increasing the productivity of all of our citizens and ensuring that our public investments generate the appropriate return.
Brian O’Shaughnessy of New Haven is a principal in the firm Community Impact Strategies Ltd.