Economic Benefits of the “New Hampshire Advantage”

The data for chart below is taken from the Federal Reserve Bank of Philadelphia’s State Coincident Index. The chart shows that New Hampshire’s economy has outperformed every other New England state since July 1992 (the base year of the index = 100). Massachusetts comes in second followed by Connecticut, Rhode Island, Vermont and Maine.

However, New Hampshire can’t sit still. The state government still has plenty of work to do, especially by enacting right-to-work and reforming the pension system.

Right-To-Work Research

Recently I came across two interesting studies on the economic impact of right-to-work laws.  The author of both of these studies is W. Robert Reed who, at the time, was with the University of Oklahoma.  Not surprisingly, he was also in Oklahoma at the time that they enacted right-to-work in 2001 (the last state to do so).  Keep that background in mind since it contextualizes the abstracts below.

The first study is “The Impact of Right-To-Work on State Economic Development: Evidence from Idaho (pdf)” (with James R. Wilbanks):

“This paper presents new evidence on the impact of Right-To-Work (RTW) on state economic growth.  It investigates manufacturing employment growth in Idaho following that states’s adoption of RTW in 1986.  Idaho is the most recent state to adopt RTW, and the only state to have adopted RTW within the last 25 years.  Using a county-level analysis and comparisons based on alternative treatment and control groups, this study finds that manufacturing employment growth was significantly greater in Idaho than in the control groups.  Medium-sized rural counties appear to have received the greatest benefit from the adotion of RTW.”

The second study is “How Right-to-Work Laws Affect Wages (pdf):

“I examine the wage effects of Right-To-Work (RTW).  Using state-level data, I estimate that, ceteris paribus, RTW states have average wages that are significantly higher than non-RTW states.  This result is robust is [sic] across a wide variety of specifications.  An important distinctive of this study is that it controls for state economic conditions at the time states adopted RTW.  States that adopted RTW were generally poorer than other states.  Failure to control for these initial conditions may be the reason that previous studies have not identified a positive wage impact for RTW.”

So, RTW leads to greater employment and wage growth.  As such, this is a win-win for both the private and public sector since greater employment/wage growth will lead to higher tax collections. Not to mention that enacting RTW itself doesn’t cost New Hampshire state government a dime in lost revenue vis-a-vis tax cuts.

Let’s hope the House can eventually muster a veto override of the right-to-work bill (HB 474).

How New Hampshire Poaches Massachusetts Businesses

A fascinating account in today’s Boston Globe about how New Hampshire poaches Massachusetts businesses:

New Hampshire pays Michael Bergeron to be a full-time thief, sending him across the border in an unmarked black sedan to poach Massachusetts companies.

To help keep his missions undercover, the business recruiter even scraped the New Hampshire state seal off his Ford Fusion. Equal parts real estate agent, financial adviser, and deal fixer, Bergeron has lured dozens of Massachusetts companies to the Granite State over the past few years with promises of lower tax bills, cheaper office and industrial space, and fewer regulations.

John Hancock Financial and Liberty Mutual Group are among the high-profile firms that recently moved significant parts of their operations over the state line – partially because of Bergeron’s pitches. And an increasing number of small and midsize firms are considering migrating as a way to reduce costs in uncertain economic times.

“New Hampshire has become an easier place to do business as Massachusetts has become more difficult,’’ said Bergeron, who works as a business development manager for the New Hampshire Department of Resources and Economic Development. “It’s a lower cost to do business here and you still have the availability of the skilled workforce in Massachusetts.’’

His PowerPoint presentations highlight what New Hampshire officials say is Massachusetts’ bad-business reputation. They cite expensive real estate, drawn-out permitting processes, and higher taxes.

There are no official statistics from Massachusetts or New Hampshire on the number of companies that have moved north. But Bergeron estimates that at least 5,000 new jobs have been created over the past five years as a result of Massachusetts businesses moving to his state.

Massachusetts officials and business leaders deny that a mass exodus is underway, although they acknowledge that New Hampshire’s aggressive recruitment tactics can’t be ignored.