May 9, 2014
Recent sudden job losses at Kentucky’s last Fruit of the Loom plant in Jamestown and at Toyota’s regional headquarters in Erlanger have hit the state hard.
They’ve also prompted wrong-headed claims that Kentucky brought this on itself by not pursuing certain economic policies—that Kentucky is getting something wrong that other states are getting right.
But those making such claims are exploiting real human and economic tragedies in an effort to further arguments that don’t hold up to scrutiny.
Those arguments draw on a ready-made tale about Texas, where 1,000 of the Toyota jobs are headed. Texas, so the story goes, has experienced an economic miracle in recent years, luring businesses and people from around the country because of policies that weaken unions and its lack of an income tax, among other things.
But there’s absolutely no evidence that Kentucky is losing economic ground to states with less commitment to economic fairness, which is what such policies exhibit.
Kentucky is as successful as any state in attracting businesses, winning in some cases and losing in others. Look no further than Toyota itself, which while closing its Erlanger facility is also reinvesting in its Georgetown plant in order to build the Lexus ES 350 there, adding 750 jobs. Most often, corporate location decisions are driven by factors like proximity to suppliers and markets, the skills of the workforce and the quality of roads and other infrastructure.
Indeed, Toyota’s decision to move jobs from Erlanger to Plano, Texas is based on gaining efficiencies, not cutting costs. Toyota decided to consolidate multiple headquarters from across the country in one facility, and Plano is a more central location between the two coasts and is close to an international seaport (in Houston) and high-quality airport (in Dallas).
More broadly, the story of the so-called Texas miracle is not as rosy as its boosters claim. It’s true that Texas has had substantial job and population growth in recent years. But that’s been driven by a high birth rate, international immigration, cheap housing and an oil and gas boom rather than anti-tax and anti-labor policies.
And Texas faces real challenges because of its policy choices. It has the highest share of minimum wage workers of any state. One-fourth of Texans lack health insurance, and the state ranks in the bottom 10 in funding for public schools.
Those claiming Kentucky should be more like Texas are saying that we will make ourselves richer only if we make ourselves poorer. But a race to the bottom in wages, funding for public services and living standards is no formula for prosperity.
Why not just follow that logic further and say we should be more like Honduras—the new home of those Jamestown Fruit of the Loom jobs? Those jobs moved to Honduras because garment workers there make only $246 a month on average, according to a Center for American Progress study, and have seen their wages fall 14.6 percent in the last 10 years.
There’s another path to prosperity in Kentucky that doesn’t involve lowering our standard of living. It centers on investment in the foundation of economic growth—particularly education, health and infrastructure—doing more to spur entrepreneurship and innovation, and making Kentucky a better place to live. That’s the secret in states with the lowest poverty and the highest incomes.
While we’ve got a long way to go in Kentucky, there are also things we are doing right. We’ve had several decades of progress in education. We’re cutting back our spending on prisons and jails, freeing up those funds for other needs. And we’re making strides to improve health and economic security by providing uninsured Kentuckians access to coverage through kynect.
We should build on these successes, and ignore tall tales about what will grow our economy.
Jason Bailey is director of the Kentucky Center for Economic Policy (KCEP), a nonprofit, nonpartisan institute that conducts research, analysis and education on important policy issues. For more of KCEP’s work visit www.kypolicy.org.