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The Providence Visitor, October, 1996

In the course of just one year, Rhode Island has gone from near recession to almost full employment. Today, our unemployment rate is about two full percentage points below where it was a year ago. It has been at or near the national rate for several months. And, after many anxious months, fiscal year 1996 ended with a budget surplus in excess of $30 million.

It appears that the economic turnaround so many Rhode Islanders had been hoping for has finally arrived. Our unemployment rate has fallen dramatically. Obviously, this must mean that many more jobs have been created. And, with our budget surplus, we should finally be able to worry less about state government spending this fiscal year. It looks like we can now begin to focus more on the present and worry less about the future. Guess again. Rhode Island, like every other state, is in the process of being transformed from a manufacturing to a service and information based economy. This has changed the "traditional" patterns of economic activity. Two striking examples of this can be seen by examining the seemingly stellar performance of our unemployment rate more closely. While long-term unemployment should have dropped significantly, it has not. In our transition from a manufacturing-based economy, layoffs and downsizing have become constant features of the economic landscape. Unemployed persons often possess skills, but not the specific skills demanded by our expanding firms. So when the economy picks up, as it recently has, these persons will continue to experience difficulties finding jobs unless they acquire new skills or training or if the types of jobs created in Rhode Island utilize these skills. For Rhode Island, the number of long-term unemployed has remained at recession levels throughout this entire recovery. Our manufacturing-to-service transition has thus taken a toll in terms of human carnage.

And, although it seems logical that our rate of job growth must have risen sharply, this too has not occurred. Rhode Island’s internal rate of job growth, or payroll employment, has performed badly for several years now. As of August, payroll employment was growing below one percent annually, less than half the national rate. Compared to last August, Rhode Island has only added 1,200 jobs. How, then, has our unemployment rate fallen? As the result of gains in resident employment, the number of Rhode Islanders who work either here or out-of-state. Resident employment is currently growing at a 4 percent rate, adding 17,500 more jobs than the same time last year. Put these two employment numbers together and a disturbing result follows: most of the employment gains that have occurred of late are by Rhode Islanders getting jobs in other states!

If, during these "good times," we are still confronted by long-term unemployment and the state’s rate of internal job creation continues to be unsatisfactory, what should we do? That brings me to the theme of this article. We must plan for the future, building on our existing strengths and attempting to eliminate the most pressing problems we face today. Rhode Islanders will have a chance to do this by voting for two specific referenda: #4, which will put in place a key part of the physical capital infrastructure we will need to sustain and expand our state’s job base; and #2, which relates to our human capital infrastructure.

Referendum #4 will add a third rail to Quonset Point/Davisville, connecting it to the Northeast Corridor and making it a part of the modernized rail system that stretches throughout the United States. It will also improve the infrastructure of its Industrial Park which will allow support facilities and other businesses to locate there. If this measure passes, Rhode Island will at last become truly competitive with other northeast ports and remain competitive into the foreseeable future. The jobs created as a direct result of this referendum will increase Rhode Island’s internal job creation and lower long-term unemployment as well, creating a greater number of jobs that utilize the types of skills Rhode Islanders currently possess. Keep in mind that part of the funding for this will come from the federal government. While this referendum will not restore manufacturing employment to where it once was, it will go a long way toward allowing Rhode Island to ultimately stabilize its manufacturing employment base.

Referendum #2 will speed Rhode Island’s transition to a service and information economy, by upgrading the telecommunications systems at this state’s three public institutions of higher learning. This too is key to Rhode Island’s future. Equipped with enhanced telecommunications infrastructures, CCRI, URI and RIC will be able to equip more persons with the skills so highly demanded in the information age, and to provide an important source for allowing Rhode Island firms to adopt to the rapidly changing technology of telecommunications. This will clearly increase and preserve our state’s ability to create jobs. And, it too will provide a basis for long-term unemployed to become employable again.

Both referenda deal with ways of connecting Rhode Island with the rest of the world. Each involves upgrading a currently inadequate infrastructure to higher technological standards. By doing this, they remove meaningful road blocks to economic growth that we now confront. There is a substantial amount of indebtedness involved here. As you are probably aware, Rhode Island’s indebtedness ranks among the highest in the nation in per-capita terms. But, much of that debt is the by-product of the failure of RISDIC years ago. The affordability of this debt must be viewed in the context of what it does to alter the future size of our economy. Both referenda move us in the future direction this state must go to avoid repeating the difficulties we now face the next time we approach full employment.

by Leonard Lardaro


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