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A murky future for Vermont

Leading economist talks about challenges, but gives little strategy

BRATTLEBORO—As members of the local business community munched their breakfast muffins and slurped coffee, a leading Vermont economist delivered his customary stomach-churning assessment of the Vermont economy.

Arthur Woolf, an associate professor at the University of Vermont and a co-founder of Northern Economic Consulting, Inc., presented economic information familiar to many in the audience at a Brattleboro Area Chamber of Commerce breakfast event, the first of its 2013-14 season, at the Brattleboro Retreat on Oct. 22.

Woolf, who served as state economist for Gov. Madeleine M. Kunin from 1988 to 1991, said that Vermont’s future is tied to its demographics.

The combination of an aging population and the flight of younger Vermonters will hamper the state’s labor pool, he said.

But the current sluggishness of the Vermont economy is not just a matter of demographics.

Five years after the start of the Great Recession, the United States remains short about 2 million jobs, he said.

And the global economy has slowed, he said. The standard of living in general has dropped.

“Things just aren’t doing well across the world,” Woolf told the audience.

And, like the United States, Vermont lost jobs in the 2008 crash, said Woolf.

But Vermont’s bigger problem, he said, may be a shortage of qualified people to fill jobs should the economy expand.

The state’s labor force “is shrinking,” Woolf said. Some of this contraction comes from about 10,000 people dropping out from the labor pool and going no-one-knows where or from workers unskilled to fill existing jobs.

A “forced shrinking,” however, comes from Vermont’s aging population, the second-oldest in the nation, concluded Woolf.

Factors contributing to the problem, according to Woolf: a low birthrate and low immigration. Vermont women are having fewer babies. Unlike the rest of the country, Vermont hasn’t received a population boost from immigration.

More people leave Vermont for economic opportunities than move here, Woolf said.

“We are not being overrun by flat-landers; the rest of the country is being overrun by woodchucks,” he joked.

Windham County’s economy, population approximately 40,000, lags the state’s. According population data between 2000 and 2012, the county’s population growth reached “essentially zero,” said Woolf.

He projected that by 2030, the population of working-aged people will have flat-lined or decreased. Meanwhile, the 45- to 60-year old population will increase 35 percent and the 70- to 80-year-olds will increase more than 100 percent.

“So we’ve got a real population problem down here,” he said.

Woolf placed a lot of the problem at the feet of Montpelier and local policymakers.

In the past 15 to 20 years, he said, state policies have led to the downsizing of Windham County’s two biggest employers, C & S Wholesale Grocers, according to its website the largest wholesale grocery supply company in the United States; and Entergy, owner of the Vermont Yankee nuclear reactor, which has announced it will close the plant in late 2014.

The state demonized Entergy, Woolf said. The comment raised a round of applause from some in the audience.

“Destroying infrastructure is not a path to economic prosperity,” he said.

Woolf said people leave Vermont for places like New Hampshire that have either better pay or a more dynamic area like a city.

Burlington, with only 40,000 people, does not count as an urban area, he said.

Finally, he said, Vermont’s labor market has few options for workers. If people move here for jobs that they later hate, they will be hard-pressed to find alternatives.

But Woolf maintains that the economy doesn’t exist to create jobs. Rather, he said, jobs result from vigorous trading of goods and services.

Big-picture issues

In a separate interview, Woolf said solving the county’s economic issues is “very difficult.”

Much of what needs changing are big-picture issues outside the county’s control, he said.

In a nutshell, policy and geography are core to the county’s woes, Woolf added.

Most young people don’t want to live in rural communities, he said. This is true nationwide. They want exciting cities with heaps of economic and social opportunities.

Brattleboro is a town, but it’s small, he said.

Another problem facing business in the county: Vermont’s “tough regulatory system,” especially on people in the upper income bracket.

The construction permitting process, for example, is expensive and tightly regulated, which ultimately raises costs. A building developer, for example, then passes expenses onto homebuyers, said Woolf.

Woolf said he likes the idea of people paying taxes according to their ability. However, people earning over $300,000 or $400,000 pay more taxes “in Vermont than anywhere.”

Why can’t entrepreneurs keep more of what they earn? They employ people, he said.

The state should want to create an economic environment which fosters entrepreneurship, he added.

A more favorable tax structure could attract business to the state. Woolf pointed to the Hanover, N.H. area as an example of a thriving economy based on low tax rates.

When asked about offering economic incentive programs, Woolf said politicians loved incentive programs as they were tangible actions they could point toward.

The problem, he said, is that creating government incentive programs assumes the government knows more about picking economic winners or losers than do private entrepreneurs.

Instead of a program offering $50 million in incentives, why not lower taxes across the board by the same amount? he said.

The state must always balance its assets and liabilities, said Woolf: like protecting the rural landscape or building an industry that offers good-paying jobs.

People should figure that some problems may have obvious short-term answers but less obvious long-term consequences, he added.

The statewide education property tax, Acts 60 and 68, may capture extra income from second homeowners, but it may also cause those homeowners to leave and buy property in another state, Woolf said.

“[In economics] there’s no right answers,” Woolf said. “There’s only choices and trade offs.”

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Originally published in The Commons issue #227 (Wednesday, October 30, 2013). This story appeared on page A1.

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