The Pennsylvania Chamber and Pennsylvania Bankers Association will host our 10th Annual Economic Summit on February 9. The event will bring together business leaders from across Pennsylvania at a critical time when many economists are warning that the nation may be headed toward recession.
Allow us to frame things in a different lens: While America continues to rebound from the Covid-19 pandemic, there are bright spots in our economy that provide reason for optimism. And, with the right policies, Pennsylvania could be the most competitive state in the nation for economic growth.
The commonwealth faces challenges – including a declining population, rising costs, and an antiquated tax and regulatory structure. However, given our many competitive advantages – our infrastructure, location, quality of life among them – we have a unique opportunity to position Pennsylvania as the best state in the nation to invest and do business.
Making advancements in key areas such as workforce development, tax reform, and regulatory reform could jumpstart our economy and put Pennsylvania among the nation’s fastest growing states.
Like most families, Pennsylvania’s businesses are not immune to the impact of rising costs and inflation. As prices rise, so does the cost of doing business.
Despite concerns about a weakening economy, the demand for workers remains strong. In fact, many employers have jobs to fill but can’t find people to fill them.
Pennsylvania saw more than 230,000 people leave the workforce during Covid. As of the latest jobs report, less than half have returned.
The labor shortage is most pronounced among younger workers. Pennsylvania’s workforce participation rate declined the most among workers under 35, creating an even greater challenge for employers in a state with an aging population that declined by 40,000 people since last year.
Consider this: If the labor participation rate had remained the same from 2020-2022, 62,000 more Pennsylvanians under age 35 would be working today – that’s more than half of the Commonwealth’s Covid workforce decline.
As Pennsylvania transitions to a post-Covid economy, one of the biggest challenges we face is ensuring that individuals are entering and re-entering the workforce with the training and skills they need to fill the jobs that are available.
Tax and Regulatory Reform
While access to labor is critical to Pennsylvania’s economic growth, so is access to capital. Businesses of all sizes in every region of Pennsylvania need capital formation to grow, innovate, and hire workers. The financial services sector plays a critical role in driving economic growth by providing access to capital. Unwarranted regulations and an uncompetitive tax structure diminish financial institutions’ ability to provide the resources necessary for businesses to succeed and our economy to grow.
Pennsylvania has one of the least competitive tax structures for businesses. The nonpartisan Tax Foundation ranks Pennsylvania 33rd for business tax climate.
The good news is that lawmakers advanced a bipartisan business tax reform package last year that begins to make our tax structure more competitive. As a result of this tax package, the Tax Foundation noted that Pennsylvania’s national ranking in its State Business Tax Climate Index and our overall tax structure ranking will improve this year because of these tax reforms, including a reduction to the Corporate Net Income tax rate. We look forward to working with lawmakers, from both sides of the aisle, to build on this momentum and enact additional tax improvements to stimulate economic growth and help Pennsylvania compete. But more work needs to be done.
Additionally, recent executive actions by our new governor, Josh Shapiro, demonstrate that regulatory reform also offers opportunity for consensus. During the first two weeks of his administration, Gov. Shapiro signed several executive orders aimed at streamlining the regulatory process, reducing the time businesses must wait to receive licenses, and making state government more responsive to the private sector. We are urging lawmakers to follow the governor’s lead and prioritize additional regulatory reform early in this legislative session and codify these key changes.
It was only last year when a leading manufacturing company headquartered in Pennsylvania invested $3 billion in Arkansas supporting 900 jobs with an average salary in the six-figures. Arkansas’ governor at the time said that the facility would be built in Arkansas “before you could even get a permit to start construction in Pennsylvania.”
We can all agree that this needs to change. Pennsylvania wants to be more competitive. We must be more competitive. And, with the right policies, we will be more competitive.
Luke Bernstein is president and CEO of the PA Chamber of Business and Industry. Duncan Campbell is president and CEO of the PA Bankers Association.