Gov. Paul LePage has made clear in recent weeks that he’s pursuing a strategy of improbability to grow Maine’s economy.
During his State of the State address in February, the Republican governor paid rhetorical attention to Maine’s small businesses and their importance to the state’s economy. But the growth strategy LePage outlined was about wooing big businesses to Maine to make major investments.
Last week, LePage provided more details about that strategy, his Open for Business zones proposal. It would designate Loring Commerce Centre in Aroostook County and Brunswick Landing — both former military bases — as “Open for Business” zones. Businesses that locate there, hire at least 1,500 people and invest at least $50 million within two years would have no state corporate income tax obligations for 10 years and a 50 percent corporate income tax cut for the next 10.
Businesses would qualify for lower electric rates and state help as they search for qualified workers and try to secure capital. Especially important to LePage, his Open for Business zones would be designated “right to work.” Employees at qualifying businesses who don’t belong to a union would have no obligation to pay fees for union representation in collective bargaining.
Few in Maine would dispute the benefit and ripple effect of a business setting up shop and providing 1,500 high-quality jobs. But in the scheme of job creation, it’s among the least likely scenarios. Few economic development projects anywhere in the U.S. in a given year would fit the Open for Business zone criteria. That’s the first reason LePage is pursuing a strategy of improbability.
The second is that the bulk of Maine’s private-sector job growth is unlikely to come from large employers. Some 62.5 percent of Maine businesses employ fewer than five people. Small businesses — defined by the federal government as enterprises with fewer than 500 employees — represent 97 percent of Maine’s employers. According to the Brookings Institution, 95 percent of all job gains annually in an average state come from within as existing businesses expand and entrepreneurs create new businesses.
LePage’s Open for Business zones strategy doesn’t have to come at the expense of small businesses. Indeed, small Maine businesses could benefit from another large manufacturing facility in the state. But LePage’s record of helping small businesses is less than stellar.
In 2012, he vetoed a $20 million bond that would have funded research and development investments through the Maine Technology Institute — investments in innovative technologies developed by growing Maine companies. Last year, he declined to sign a bill funding the FAME-administered Maine Seed Capital Tax Credit, which is available to those who invest in Maine startups. LePage’s inaction caused a delay in the credit’s availability.
LePage’s reliance on a controversial right-to-work provision for large companies is the third improbable element of his job growth strategy. While LePage touts right-to-work as a major instrument of job creation, academic research on the topic doesn’t show that’s true. In fact, that research shows right-to-work provisions have virtually no effect on economic growth or growth of a state’s manufacturing sector. The provisions don’t depress wages, either, as Democratic opponents of right-to-work laws claim they do.
The improbability of LePage’s job growth strategy doesn’t only extend to job growth itself. LePage is unlikely to succeed in passing any sort of right-to-work provision through a Legislature dominated by union-supported Democrats.
If he pushes his Open for Business plan aggressively, LePage will be bracing for a major political fight — and it would be over a provision that’s largely meaningless in encouraging job and economic growth. Political fights and uncertainty aren’t exactly winning ways to attract business to a state.
In a 2013 survey of corporate officials involved in site selection, Site Selection magazine found their top three location criteria were “existing workforce skills,” “transportation infrastructure” and “state and local tax scheme.” Union activity ranked ninth.
A strategy to attract big businesses to Maine isn’t automatically a negative. It’s that, with LePage, it’s come at the expense of meaningful investments in the state’s small businesses and a focus on economic development issues that are actually meaningful.