The Good and Not-So-Good News from Missouri’s Labor Market

Posted on by Rik W. Hafer

The Bureau of Labor Statistics (BLS) recently released its report on state employment (see Table 5) allowing us to see how Missouri’s labor markets have fared.

The good news is that between December 2013 and December 2014, seasonally adjusted nonfarm employment in Missouri increased by 44,700 jobs to a preliminary estimate of 2,795,000 jobs. This amounts to a 1.62 percent increase. Compared with our neighboring states, in terms of percentage increases, in 2014 Missouri did better at creating jobs compared to Kentucky, Iowa, Kansas, Illinois, and Nebraska. Missouri’s rate of job growth lagged that in Tennessee, Arkansas, and Oklahoma.

Although Missouri did relatively well when comparing percentage growth rates for 2014, the not-so-good news is that the state’s economy has not been generating jobs at a pace that would return employment to levels seen at the onset of the Great Recession.

The table below ranks Missouri and its neighboring states by their ability to create jobs over the past six years. The first column of numbers reports the most recent estimate of nonfarm jobs (seasonally adjusted) in each state in December 2014. The second number column includes the peak number of jobs and the date of the peak. The final column reports the difference between the peak employment number and that for December 2014. Based on this comparison, Missouri has lagged neighboring states in job production over the past six years. The current number of jobs in five states (Kentucky, Nebraska, Tennessee, Iowa, and Oklahoma) is above their previous peak, while Arkansas and Kansas are relatively close to their peak. Missouri shows a substantial lag of 15,700 jobs. The silver lining? It isn’t as bad as Illinois.

Trying to explain the differences in job creation would require more space than we have here. Still, possible candidates are the mix of industries in each state; the migration of companies (and people) to better economic climates; and the states’ taxes and spending policies. Whatever the reasons, the Missouri economy is still looking for the answer.

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Don’t Ban Tesla, Let It Compete

Posted on by Joseph Miller

We wrote last year about the attempt of Missouri Car Dealers and their lobbyists to prohibit Tesla from directly selling its vehicles to consumers. The Missouri Department of Revenue granted Tesla a dealership license in 2013, and the company now has stores in University City and Kansas City. But according to the Missouri Auto Dealers Association (MADA), Tesla is breaking Missouri’s Motor Vehicle Franchise Law and creating unfair competition through its manufacturer-direct sales. Legislative action to shut down Tesla failed last year, so MADA has sued the Department of Revenue.

However, MADA’s claims hold little merit. The Motor Vehicle Franchise Law bans manufacturer-direct sales for franchisors (meaning those with franchises in the state). Tesla does not use the franchise model to sell its cars, and hence is not banned from direct sales. And this is not a loophole. The Franchise Law was designed as a series of protections to prevent large car companies from undercutting their own franchisees. It was not written to enshrine the independent car dealerships as the only method to sell cars in the state.

That is an important distinction, because whether or not Missourians believe car companies need to be legally prohibited from cannibalizing their own marketing and sales outlets, there is no economic justification banning a manufacturer-direct car sales model. As I wrote in a recent op-ed:

. . . vehicle distribution through dealerships can be costly to the consumer. The 2009 Department of Justice paper “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers” reported that as much as 30 percent of the cost of a new car is due to auto distribution. Enshrining the car dealership model in law has limited the ability of car manufacturers to both reduce inventory costs and increase customization, practices common in other markets. In Brazil, where GM can engage in direct sales, cost savings from order to delivery averaged 8.6 percent through direct sales.

Car buyers . . . might prefer directly buying from manufacturers for lower prices, customization, or simply to avoid bargaining at a dealership. A J.D. Power and Associates poll found that half of Americans profess a desire to buy manufacturer-direct, even if the prices are equivalent.

While that does not mean the dealership model would or should disappear, the government should not stop Tesla or any other car company from trying something different. That freedom to innovate is essential for a competitive market.

Union Cronyism and the Board of Aldermen

Posted on by John Wright

108696481_construction_worker_holding_hard_hat_articleI was driving home from work the other day and listening to “Back Stabbers” by the O’Jays on 88.1. At the end of the song, the DJ gave some commentary, “The back stabbers. They smile in your face. It could be the milk man, it could be one of your friends, or it could be the St. Louis Board of Aldermen.”

I didn’t catch why my DJ was upset with the Board of Aldermen, but one reason Saint Louisans are upset with the board right now is their decision to consider a bill that purportedly limits minority businesses from bidding on county government contracts.

The bill mimics regrettable legislation passed by the county in 2012 that requires bidders on construction contracts of $25,000 or more to maintain their own Department of Labor-approved apprentice program. The catch is that union contractors are often the only bidders who can meet this requirement.

When the county council adopted its bill in 2012, my colleague David Stokes wrote,

While some non-union companies do participate in apprentice programs through industry organizations, union-affiliated companies still have a decided advantage in meeting the requirements of this new bill. This is a blatant ploy to guarantee that union companies will win all county bids. . . .

Using the council’s authority to prevent non-union contractors from even attempting to participate in county projects is an egregious misuse of power. It is bad enough that this will increase costs to taxpayers, but the use of government for political favoritism is simply indefensible and immoral.

Just as it was two years ago, this type of legislation still appears to be a naked attempt by elected officials to please a powerful special interest.

Law should facilitate open access, such that access to public institutions is not contingent on personal relationships and political connections. Law should be structured to apply to everyone equally. By favoring unionized contractors over non-unionized contractors, this bill fails in providing a neutral rule. It reeks of cronyism, and it is the sort of thing Saint Louisans are right to be upset about.

The Return of the Transportation Sales Tax

Posted on by Joseph Miller

Last year, Missourians soundly rejected Amendment 7, which proposed a 0.75 cent increase in the state sales tax to fund transportation improvements in the state. Its main purpose was to head off an impending funding crisis for the Missouri Department of Transportation (MoDOT), which will not have enough funds to maintain the highway system in its current state by 2017. But it turns out Missourians might not have seen the last of that transportation sales tax.

Whatever the reasons Amendment 7 failed, it was good for Missouri that it did, because it was not wise policy. Using a general sales tax to pay for highways is both unfair and economically unsound. Instead, the state should modernize the user-tax base that currently funds MoDOT. That could mean increasing the fuel tax, raising the motor vehicle sales tax, indexing licensing fees to inflation, implementing tolling, or some combination of those methods. That way, those who use the roads would pay for them, and in proportion to their use. Using general sales tax to fund roads subsidizes driving and interstate trucking that passes right through Missouri. As we wrote before:

… the fact is the vast majority of trucking freight in Missouri is not bound for Missouri. For example, of the 500 million tons of freight traffic in 2011, only 39 percent of that freight is either inbound or intrastate trucking. Forty-six percent of traffic by weight simply passes through Missouri. In terms of value of the goods transported, only 26 percent has a destination within Missouri while 61 percent of goods by value transit the state.

Unfortunately, a new bill in the Missouri House (HJR 33) would simply revive Amendment 7, albeit in a different form. Instead of raising the state sales tax by 0.75 percent, the bill would divert 0.10 percent of the state sales tax into the road fund for five consecutive years until the amount diverted reached 0.50 percent (two-thirds of Amendment 7). If that came to pass, it would mean that 12 percent, or $233 million in 2014 numbers, of state sales tax revenue would be diverted to the state road fund. That is likely to lead to budget cuts in other state programs or higher taxes for Missourians.

As we have written before, the defeat of Amendment 7 opened the door for sound, user-based policy solutions to MoDOT’s funding problems. HJR 33 is not one of these.

It’s Groundhog Day for Saint Louis and NFL Stadiums

Posted on by Joseph Miller

The story is everywhere: Saint Louis is in danger of losing its NFL team because the city’s current stadium is outdated. With the team on the verge of moving, state officials have developed a plan for a new publicly financed state-of-the-art stadium, but it may be too late. The owner sees greener pastures out west, and, after year upon year of subpar play on the field, fan support is tepid. They may not support using public dollars to finance a new domed stadium.

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That’s right, this story is not about the Rams; it’s about the St. Louis Football Cardinals circa 1988. But the stories are so similar that, if the Post-Dispatch were to change the date, a few proper nouns, and replace “dome” with “open-air stadium,” they could easily republish articles written decades ago.

If Saint Louis’ position is analogous to the one it experienced in 1988, there is much reason for caution. Back then the conventional wisdom was that domed stadiums were the future and open-air venues were a thing of the past. As one Post-Dispatch writer put it, “A domed multi-purpose building, involving an enlarged convention center, would not be the white elephant of an isolated, open-air athletic stadium.”* Despite the last-ditch stadium proposal, the Cardinals moved anyway.

But that did not stop plans for a dome. Then, as today, regional leaders claimed that having an NFL team was a boon for the local economy and city pride. Thus, building a new stadium was the “progressive” action, and it was needed to “compete for sports, convention and political bucks.”* In the area of urban development, the Post-Dispatch published articles about how the RCA Dome transformed downtown Indianapolis, hinting at similar results for Saint Louis. In a demonstration of an uncritical, keeping up with the Joneses mindset that too often guides municipal governance, one prominent stadium plan supporter commented, “You know, the other cities that have built domes are not totally stupid.”* When state and local residents voted to go forward with a publically financed dome, one Post-Dispatch columnist claimed that it “all sounds like a dream.”*

Now the dream is over. While Saint Louis eventually lured the Rams in 1995, it did so with a sweetheart deal that has been described as the “worst lease ever,” part of which frees the Rams to leave the city after only 20 years. The dome, which was described as “cutting-edge” and even “intimate”* in 1995, is regularly maligned. In fact, talk of the dome being out of date began as early as 2007, just 12 years after it was completed. As for urban regeneration, other than the heavily subsidized developments on Washington Avenue, progress has been limited and certainly not centered on the dome.

The history of the Edward Jones Dome demonstrates the pitfalls of using public dollars to chase the NFL. Perhaps that will cause Missourians and public officials to be more skeptical of the new stadium proposal. But then again, you know, the other cities that have built open-air stadiums are not totally stupid.

Kansas City, Meet the 325 Plan

Posted on by Joseph Miller

The decreasing amount of funding available for state highway improvements has led the Missouri Department of Transportation (MoDOT) to plan for lean times. Their draft proposal is the 325 Plan, which denotes the amount of money ($325 million) MoDOT will have for construction contracts in 2017. The amount MoDOT claims to require to maintain the state highway system in its current state of repair is $485 million in new construction contracts.

As we wrote before, the plan does not simply prioritize the highways that are most used for commercial and personal transportation. Rather, MoDOT will split state highways into a primary and secondary system. The primary system will include the highways necessary to connect all of Missouri’s communities, while the secondary system mostly handles local traffic. For this reason, Missouri highways that carry less than 500 vehicles a day are sometimes in the primary system while heavily trafficked US routes in urban areas are sometimes in the secondary system.

The primary system under the 325 Plan will cover about 8,000 miles of Missouri’s 34,000-mile highway system, and it will receive the funding to maintain its current state of repair. The secondary system will be maintained as much as funds allow, but their state of repair will deteriorate over time. A map of the 325 primary highways in the Kansas City area is shown below.

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All told, only around 900 of Jackson, Clay, and Platte County’s 1,800-plus miles of state highways will be included in the 325 Plan’s primary system. While that includes all of Kansas City’s interstate highways, it excludes most Missouri routes and as much as half of the US routes in those three counties. Among those left out are parts of US 169 and US 71, both of which carry thousands of trucks and tens of thousands of passenger vehicles every day. These well-published omissions have led some to believe MoDOT is attempting to spread the pain wide, instead focusing on maintaining the most efficient highway system, in an effort to convince residents to increase funding.

Whether or not MoDOT’s 325 Plan is politically motivated, there is no doubt that without increased funds parts of the state highway system in the Kansas City area are going to suffer. That is not good for quality of life or the economic competitiveness of the region. If that situation is to be avoided, Missouri will have to modernize the user-funding base that supports the state’s critical roadways.

The Wonderful Evergreen Clause

Posted on by John Wright

Imagine you had a contract with your employer that could never be altered unless both you and your employer agreed to the changes. Imagine this contract was a windfall for you, giving you a four-day weekend, up to three months paid vacation each year, and the ability to retire early with a great pension. That might be great for you, but would it be fair?

If you live in the Saint Louis Metropolitan Area, as a taxpayer you might be the employer bound to such an agreement. The beneficiary of this arrangement? Your local firefighters union.

Nicknamed “evergreen clauses” because they make a contract last forever, these contract provisions are popping up in government collective bargaining agreements across the country. And they create a situation where elected officials cannot alter the pay, benefits, or work rules captured in a union contract unless the union agrees to this change. In practice, this means that pay and benefits can be ratcheted up in years when public finances are good and the union controls public officials, but pay and benefits cannot be brought back down when the union loses its influence or public coffers are tapped.

In West County, the Monarch Fire Protection District has tried to change the terms of its contract with International Association of Fire Fighters (IAFF) Local 2665, but it is limited by an evergreen clause. At issue in the contract are provisions that state:

  • There will be no duties (other than an alarm) assigned to safety staff after noon of each working day. Each working day is a 24-hour shift.

  • A firefighter/paramedic works three days in each nine-day period (two-to-three days each week).

  • A firefighter/paramedic with 15 years of service (most of the shift staff) is entitled to 27 days of paid vacation each year. Working nine days a month, this comes to about three months of vacation a year.

  • In addition to vacation days, a firefighter/paramedic also receives paid days off in the form of sick days and “Kelly” days.

  • Sick leave accrues over time and can be “cashed out” for pay.

Perhaps these provisions made sense when they were adopted several years ago, but now the fire district, and by extension the taxpayers, are powerless to change them.

Contracts like this shift the power of government away from the democratic process to the government union benefiting from the contract. Missouri citizens should consider whether they really want their government to have the power to bind itself to a contract indefinitely.

At the time this story went to print, the firefighters union had not responded to our request for comments.

Saint Louis, Meet the 325 Plan

Posted on by Joseph Miller

As we have written many times before, Missouri is rapidly running out of the necessary funds to maintain, much less improve, the state highway system. In response to the growing problem, the Missouri Department of Transportation (MoDOT) has come out with a draft proposal on how it will operate in lean times. The proposal is dubbed the 325 Plan, to denote the construction budget ($325 million) MoDOT will have to work with by 2017.

The heart of the 325 Plan is separating a primary state highway system that is necessary to connect Missouri’s communities from a secondary system. That primary system, about 8,000 miles of the state’s 34,000 miles of highways, will be kept in the condition they are in today. The remaining miles will receive less-than-adequate maintenance and will deteriorate over time.

Should the 325 Plan be implemented, it would be bad news for Saint Louis City and County. That is because the plan prioritizes the highway connections between, and not among, Missouri’s communities. Very heavily trafficked highways like Lindbergh, Gravois, Route 340, and parts of Manchester Road will not be part of the primary system because they carry mostly local traffic. All told, only around 55 percent of Saint Louis City and County’s state and interstate highways (by route mile) would receive primary system funding. The map below shows the area’s state highways and what portion would be in the primary system under MoDOT’s 325 Plan.

325

The obvious absence of US 67 (Lindbergh), despite the fact that it is both a US route and carries more than 20,000 daily vehicles (along with more the 2,000 trucks) along much of its length, in favor of rural highways that carry only hundreds of vehicles has led some to describe the plan as anti-urban and a political move to spread the pain wide. Whether or not this charge is merited, MoDOT’s declining construction budget was always going to mean tough choices and deteriorating roads in much of the state. That’s a situation to avoid, and one that can be avoided if the state modernizes the user-fee base that has funded the highway system for decades.

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