We DON’T want your money!

 

Friends,

At this time of year, a lot of non-profits ask for contributions. This year, we’re not! Why? Because we are very close to being able to win an online contest that would net us $50,000. Yep – $50,000 to help create a more prosperous, equitable, sustainable and inclusive Ohio. But we need your vote.

We’ve joined a group of nonprofits as part of a Progressive Slate competing in the Pepsi Refresh contest. Click here to join the slate so you can vote for us and our allies. Once you join, you’ll get a daily e-mail for the rest of December with instructions on how to vote for us and the other social justice groups.

The first day involves a couple of different sign-ups but by the second day it’s simple. Can you sign up now to help us win?

This money will make a huge difference for our work in 2012. We’ll use it to help families avoid bad loans, save money, and start building toward a better future for themselves and their kids. Other groups on the slate are training Latino, black and LGBT kids, increasing civic engagement among minorities, making our schools safer and more.

We won this contest once before and right now we’re just outside the winning range. With your help, Policy Matters can again get resources to help create an economy that works for everyone. Click here to join the slate and vote for us and our allies.

Sincerely,

Amy Hanauer and the Policy Matters Ohio team

p.s. If your friends would also be interested, please forward this e-mail to them! Thanks for spreading the word about the Progressive Slate.

Prison sale’s fuzzy math

Editorial

Gov. John Kasich believes the private sector does many things better than state government. That’s why he privatized the state’s economic-development efforts, and proposes leasing the Ohio Turnpike, privatizing management of liquor operations and the lottery, and selling off or privatizing some prisons.

So far, the governor’s faith has reaped few rewards. Now, a nonpartisan research organization says Mr. Kasich’s plan for privatized prisons could cost Ohio taxpayers millions of dollars.

The Kasich administration wants to sell a state prison, will install private management at two facilities in Marion tonight, and plans to combine operations of two Grafton facilities, one of which is privately operated. Officials say selling Lake Erie Correctional Institution in Conneaut to Corrections Corporation of America would save the state $3 million a year. Executing the entire plan would save about $7 million a year, they estimate.

Not so fast, says Policy Matters Ohio. Last April, the think tank found omissions, oversights, and errors in the state’s figures on potential savings from privatization. After the state revised the numbers, Policy Matters concluded recently that selling the Conneaut prison would be, at best, an economic wash.

At worst, though, privatization could cost taxpayers millions of dollars in future years if a prison’s private owner seeks a rate increase. Policy Matters says Corrections Corporation of America has employed that strategy.

More than half the projected $7 million in savings would come not from privatization, but from returning the North Coast Correctional Treatment Facility to state control and merging its operations with the state-run Grafton Correctional Institution. And savings the state says it will get from not having to pay for maintaining the relatively new Lake Erie facility have not been substantiated.

Ohio has dabbled in private prisons for 10 years. A state law requires a minimum of 5 percent savings from privatization. But no one in state government knows how much, if anything, has been saved by privately run prisons. That’s not a strong basis for handing more control of prisons to for-profit companies.

Also unanswered is the question of how private owners will generate savings for the state and profits for themselves. Experience elsewhere suggests that possible answers could include fewer guards and lower pay, less money spent on training, more crowding of prisoners, and fewer inmate services such as psychological counseling, drug and alcohol treatment, education, and rehabilitation.

If those things occur, Ohio can expect lower morale and higher turnover rates among guards, seething prison environments, poorer supervision, a lower rehabilitation rate, and more repeat offenders. Policy Matters says lower pay rates, fewer guards, and profits that follow out-of-state owners would reduce the impact of state spending on local communities that have prisons. And private operators will be less transparent and accountable, which could lead to prisoner abuse.

Right now, the numbers on private prisons in Ohio just don’t add up.

Prison sale’s fuzzy math

New Year’s policy prescriptions

Beyond the boom – Our latest report looks at the public costs of the anticipated shale-gas drilling boom in Ohio and recommends raising the state’s severance tax – levied on mineral extraction – to help cover new spending for roads, schools and other services the drilling boom will require. Boosting the tax to rates similar to those charged by some neighboring states would bring in an estimated $538 million over the next four years of skyrocketing natural gas production forecast by the industry, and could also defray costs of likely environmental damage caused by hydraulic fracturing, or “fracking.” Our report came out on the heels of a study from Ohio State Universitythat downgraded the official estimate of Ohio jobs that would be created by fracking to 20,000 from 200,000.

 
A few hours after we released our report, Ohio Gov. John Kasich told reporters that he was considering an impact tax as well as changes to the severance tax. Coincidence? Or the result of Policy Matters making our voice heard? We’ll let you decide!
 
Nothing to crow about – Along with everybody else, we’ve been keeping an eye on the Ohio jobs picture. But we occasionally come to different conclusions than some of our friends in Columbus, and December was no exception. Even as Gov. Kasich was touting new jobs figures that showed the largest month-to-month drop in Ohio’s unemployment rate in decades, our recent JobWatch report carefully explained that the decrease happened because so many Ohioans have given up looking for work. As this article in the Plain Dealer explained, we stuck to our nonpartisan approach and “threw cold water on both Republicans and Democrats.” (The latter claimed credit for President Barack Obama’s job creation policies.)
 
Bad idea – Ohio’s ongoing prison privatization efforts continue to be based on questionable assumptions about costs and savings, according to our second report on the subject this year. We found that Ohioans have a right to be skeptical about claimed savings, as our analysis suggests that privatization moves involving three state facilities, announced in September, could end up costing the state more, rather than saving scarce taxpayer dollars.
 
Hollowing out the middle class? – Our analysis found a shrinking share of jobs in Ohio that require more than a high-school diploma but less than a four-year college degree. This shoul d be viewed as a call to action to boost educational attainment and to directly address our sluggish economy; Ohio can reverse course by investing in training and jobs for the middle-class economy
 
Have a stimulating new year… On January 1, Ohio’s minimum wage will increase 30 cents to $7.70 an hour, thanks to the state’s voters who approved a 2006 constitutional amendment that provides for annual rate adjustments. The raise will benefit some 347,000 workers in Ohio, and will add up to an extra $624 per year in wages for a full-time minimum wage worker. More Ohio workers will be directly affected by this increase than in any of the other states seeing a boost, according to an analysis by the Economic Policy Institute, which we co-released in Ohio.
 
… and let’s be good (or at least better) – Ohio is among the many states that fail to leverage corporate subsidies for good jobs, according to this analysis by the national group Good Jobs First. The state ranked 33rd among states on performance and job quality standards for companies that get financial incentives to re-locate to or stay in the state. Along with our national partner, we recommend that the state insist that all subsidized firms create good jobs with family supporting wages and good benefits.
 
Home stretch for $50K – 4 more days + 4 more minutes + 4 more votes = $50,000 to help low- and middle-income Ohio families save money and avoid financial exploitation. Go to refresheverything.com, sign up and vote for Policy Matters Ohio. Also text the code 110892 to the phone number 73774. Then direct your own end-of-year contributions to someone else because we’re doing this instead of asking! If you’ve already signed up, please keep voting!
Happy New Year to all, and best wishes for a more prosperous, equitable, sustainable and inclusive Ohio!
 
Thanks from Amy Hanauer and the Policy Matters Ohio team
 
Add Policy Matters Ohio to your Google reader here.
 

Ohio to increase minimum wage on New Year’s Day

Ohio’s minimum wage will increase 30 cents to $7.70 an hour, raising wages for 347,000 low-wage workers in the state. Ohio’s minimum wage increase means an extra $624 per year in wages for a full-time minimum wage worker.

 
For immediate release
Contact: Amy Hanauer, Policy Matters Ohio: 216.375.9274
Lynsey Kryzwick, National Employment Law Project: 917.683.4474

 

Raise will benefit 347,000 low-wage workers and strengthen economy

Washington, DC – On January 1st, Ohio’s minimum wage will increase 30 cents to $7.70 an hour, raising wages for 347,000 low-wage workers in the state. Ohio’s minimum wage increase means an extra $624 per year in wages for a full-time minimum wage worker. The increase is the result of a state constitutional amendment approved by Ohio voters in 2006 that provides for annual rate adjustments that keep pace with the rising cost of living. Ohio is joined by seven states – Arizona, Colorado, Florida, Montana, Oregon, Washington and Vermont – that will also raise state minimum wage rates on New Year’s Day, boosting wages for more than 1.4 million workers nationwide. More Ohio workers will be directly affected by this increase than in any of the other states seeing a boost this week.

The increased consumer spending generated by the raises will lead to an additional $366 million in GDP and create the equivalent of more than 3,000 full-time jobs, according to an analysis by the Economic Policy Institute. While weak consumer demand is holding back business expansion, raising the minimum wage puts more money in the pockets of low-wage workers who have little choice but to spend that money immediately on goods and services. 

The National Employment Law Project hailed the upcoming increases for spurring recovery for families and the economy and called on Congress to follow suit. “These minimum wage increases represent bright spots on an otherwise bleak economic horizon,” said Christine Owens, executive director of the National Employment Law Project.  “Workers’ buying power is the secret weapon in the fight to get our economy back on track. Ohio is taking action to protect that critical buying power. Congress should follow Ohio’s example to realize these benefits for the national economy.”

An estimated 291,000 workers in Ohio will be directly impacted as the new minimum wage rate will exceed their current hourly pay, and 56,000 more will see a raise as pay scales are adjusted upward to reflect the new minimum wage, according to an analysis of government data by the Economic Policy Institute. Seventy-three percent of these low-wage workers are over age 20; 71 percent work 20 hours per week or more. [See Table 1 for a complete demographic breakdown.]

Strengthening the buying power of low-wage workers is especially critical in the current economic climate. A recent NELP study finds that the majority of new jobs created in the wake of the recession are in low- and mid-wage occupations. And while the share of the workforce comprised of low-paid workers is growing, the wages for this group are declining: workers in lower-wage occupations (with median wages under $13.52) have seen a 2.3 percent decline in real wages since the recession began. The proliferation of lower-wage jobs in the economy means the impact of the minimum wage will be even greater in setting wage scales for growing industries in which millions of workers will spend their careers.  Wages and salaries are now the lowest share of GDP since 1955, while corporate profits are the largest share of GDP since 1950.

“The increase in the minimum wage will help Ohio’s lowest wage workers have a bit more in their pockets, which will in turn boost Ohio’s struggling economy,” said Amy Hanauer, executive director of Policy Matters Ohio, which released the EPI analysis in Ohio. “Although it’s a modest change, this small boost is in the right direction for Ohio workers, Ohio communities and the Ohio economy.”

Eighteen states plus the District of Columbia have minimum wage rates above the federal level of $7.25 per hour, which is just over $15,000 per year for a full-time minimum wage earner. Unlike the federal rate – which loses value every year it is not increased by an act of Congress – 10 states increase their minimum wage rates annually to ensure that real wages for the lowest-paid workers do not fall even further behind: Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, and Washington. Nevada indexes its minimum wage in July; Missouri announced that the state minimum wage remains below the federal minimum wage, and that the federal rate will continue to apply this year.

A large body of research shows that raising the minimum wage effectively boosts low-wage workers’ incomes without reducing the number of low-wage jobs or hours. A groundbreaking 1994 study by David Card and Alan Krueger, who now heads President Obama’s Council of Economic Advisers, found that an increase in New Jersey’s minimum wage did not reduce employment among fast-food restaurants. These findings have been confirmed by 15 years of economic research, including a 2010 study, published in the Review of Economics and Statistics, which analyzed data from more than 500 counties and found that minimum wage increases did not cost jobs. Another recent study, published in April 2011 in the journal Industrial Relations found that even during times of high unemployment, minimum wage increases did not lead to job loss.

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Tax dollars hidden in shale: Policy Matters says extra money would help budget

By Spencer Hunt

Ohio could collect an additional $528 million over the next four years if it increased taxes on oil and natural-gas production to levels that Michigan and West Virginia charge energy companies, according to a new report.

The money could help offset state budget cuts made to local governments and schools and ease feared environmental and public costs associated with an expected boom in shale drilling, said Wendy Patton, senior project director for Policy Matters Ohio, the liberal-leaning, Cleveland-based advocacy group that issued the report.

Ohio currently collects 3 cents per 1,000 cubic feet of gas and 20 cents per barrel of oil. The state collected $2.55 m illion from oil and gas production in 2010, according to the Ohio Department of Taxation.

The Utica shale in Ohio is expected to hold huge quantities of oil and gas, prompting energy companies from across the country to buy up drilling rights.

“There are upfront costs of drilling, particularly maintenance of roads,” Patton said. “This industry also brings unusual financial risks associated with pollution.”

Officials with Gov. John Kasich’s office wouldn’t say if they would support the idea. But Rob Nichols, a Kasich spokesman, said Policy Matters typically supports “big government” and increased spending.

“They want more money spent and more taxes to support it, period,” Nichols said.

A spokesman for the oil and gas industry said higher taxes would slow the pace of shale drilling in Ohio and the jobs that would come from it.

“All this policy group is saying is ‘Let’s go and rake this industry and see if you can get more revenue out of it,’  ” said Tom Stewart, vice president with the Ohio Oil and Gas Association.

The Policy Matters report, “Beyond the Boom: Ensuring adequate payment for mineral wealth extraction,” is the latest wrinkle in the growing interest in Ohio’s Utica shale, from which oil and gas can be removed with the help of horizontal drilling and “fracking.”

The process injects millions of gallons of water laced with chemicals into wells to shatter the shale and free trapped oil and gas.

More than 3,800 natural-gas wells have been drilled into the Marcellus shale in Pennsylvania since 2005. Pennsylvania doesn’t tax oil- and gas-well production, Patton said.

Last year, Pennsylvania lawmakers defeated a bill that would have imposed a 39-cent tax for every 1,000 cubic feet of natural gas produced, according to news reports.

Elizabeth Brassell, a spokeswoman for the Pennsylvania Department of Revenue, said Gov. Tom Corbett opposes such taxes.

“The position of the Corbett administration is that an additional tax would be unfair,” Brassell said.

The Policy Matters report estimates that Ohio would raise $538 million from 2012 through 2015 if it charged a 5 percent tax on the value of the natural gas that the shale wells produce.

Patton said the state also should charge 5 percent rates on the value of oil, propane, butane and ethane produced.

She said Michigan and West Virginia charge the same 5 percent tax rates, which haven’t slowed drilling. She said Texas’ 7.5 percent tax and Oklahoma’s 7 percent tax haven’t slowed shale drilling in those states, either.

Just how much oil-and-gas tax money could be collected is a matter of conjecture. The Policy Matters report bases its $538 million figure on a four-year shale-drilling production estimate that the Ohio Oil and Gas Association released in a September report.

The Oil and Gas Association also estimated that shale drilling would help create 200,000 jobs by 2015. On Friday, Ohio State University researchers said 20,000 new jobs would be a more-realistic estimate.

Group: Tax dollars hidden in shale

Jobs gap

Editorial

On Friday, John Boehner applauded the decline in Ohio’s unemployment rate last month, from 9 percent in October to 8.5 percent. The U.S. House speaker attributed the steepest month-to-month drop in 28 years to “clear signs of progress being made in the Buckeye State under the leadership of Gov. [John] Kasich.” He argued that the Kasich approach “contrasts sharply with the failed jobs policies of the Obama administration.”

Yet the national unemployment rate followed virtually the same track, dipping from 9 percent to 8.6 percent. No clear signs of progress?

Actually, neither Republicans nor Democrats should be pleased. The jobless numbers deserve context. As Policy Matters Ohio noted, the state story differs little from what is happening at the national level. The Cleveland-based think tank argued in an analysis, “Nothing to crow about,” that the decline in the unemployment rate reflects, to a large degree, workers exiting the labor force, abandoning the search for a job.

The state Department of Job and Family Services pointed to the addition of just 6,000 jobs in November. The number of people reported as being employed climbed by 7,000. At the same time, 22,000 Ohioans left the labor force, the largest monthly decline this year.

As Policy Matters Ohio explained, the November jobless number reflects 30,000 Ohioans moving out of unemployment. Two-thirds of those have given up their job search, and no longer count as part of the work force. In addition, it is worth stressing that since the end of the harsh recession in June 2009, the state has experienced a weak 1.2 percent rate of job growth, This past year, the pace has been a slower 0.9 percent.

In 2010, 65.2 percent of working age Ohioans were working or actively looking for work. Today, the labor force participation rate is 64.7 percent.

To his credit, the governor highlighted that “we have a lot of progress yet to make.” How much is “a lot”? Consider that at the start of the recession, 5.4 million Ohioans were employed. The current number is roughly 5.1 million. Return to 2000, or the eve of the previous recession, and more than 5.6 million Ohioans had jobs. The state has yet to recover from either recession.

No question, the governor has been hustling, looking to attract and retain employers with tax relief and other incentives. He rightly wants to take a regional approach to economic development. At the Statehouse, the expectation is, he will call for further tax cuts. What worries in view of the large task is the lack of evidence that more tax cuts deliver. If anything, public investment provides a foundation for private growth. Yet in something as important as education, the governor already has taken a big whack. Hard to believe Ohio can make up its jobs deficit without investing sufficiently in its people or the services that support business.

Jobs gap (editorial)

Ohio should raise severance tax on shale gas

Revenue would help cover public costs, report finds

For immediate release, Monday, December 19, 2011

Contact Wendy Patton at 614.221.4505

If Ohio levied a severance tax on oil and gas at rates similar to neighboring states, it could generate up to $538 million in new revenues between now and 2015. These funds would help with the up-front, public costs of the anticipated drilling and lay the groundwork for a strengthened economic future. In a paper released today, “Beyond the Boom: Ensuring adequate payment for mineral wealth extraction,” Policy Matters Ohio recommends that the state raise its severance tax on oil and gas to 5 percent of value, equal to the rates in West Virginia and Michigan.

“Ohio’s severance tax is one of the lowest among states with potential to produce oil and gas from shale,” said Wendy Patton, author of the new report and senior project director at Policy Matters. “Part of preparation for the coming boom should include raising the severance tax rate to a level consistent with other energy states.”

States with significant reserves of natural shale gas include Texas, with a severance tax rate of 7.5 percent; Oklahoma, 7 percent; and Arkansas, Michigan and West Virginia, 5 percent. Louisiana has a rate on volume of gas produced of $.16 per thousand cubic feet (mcf). Pennsylvania currently has no severance tax, but is considering one.

Ohio’s rate on volume of gas produced is $.025 per mcf (with an additional $.005 for conservation). The effective severance tax rate on natural gas over the past decade has been less than half of 1 percent. The situation for oil is similar, with Ohio’s rate of $.10 per barrel, (with a matching conservation fee) at the low end among states with a severance tax on oil and an average effective severance tax rate over the past decade of less than one fifth of 1 percent of value.

States with high production of minerals use the severance tax to compensate for depletion of natural resources. The revenues strengthen and stabilize public services that build the economy of the future, including schools and higher education. The tax is deductible from federal taxes, which softens the impact on producers. Ohio ranks 25th in severance tax collections among the 35 states that collect such a tax, yet 19th in production of natural gas and 17th in oil production. 

Horizontal drilling and hydrofracturing (‘fracking’) are expected to significantly boost drilling in Ohio. Fracking, which uses millions of gallons of water laced with chemicals and other additives, is exempt from the federal regulations, yet is suspected of pollution in watersheds and aquifers. Costs associated with increased drilling activity as well as with pollution may impact state and local finances, while the level of benefits predicted by the industry may not materialize.  The so-called ‘natural resources curse’ of places rich in minerals but with low in per-capita income -  from West Virginia and Louisiana to Nigeria – warns of trouble beyond the boom.

“Many mineral-rich states dedicate their severance tax collections to trust funds that finance services during drilling and strengthen the state once minerals are depleted,” said Patton. “The severance tax is how energy states ensure impacted communities are protected and wealth invested to create a better future for all residents.”

Download press release

Full report


Selected media coverage

Group: Tax dollars hidden in shale, Columbus Dispatch, December 20, 2011

 

Beyond the Boom: Ensuring adequate payment for mineral wealth extraction

The anticipated boom in natural gas and oil in Ohio stands to create great private wealth. But Ohio’s severance tax, which specifically captures a share for the public good, is low. Policy Matters recommends that Ohio’s lawmakers raise its severance tax in order to retain a fair share of wealth to help pay for costs associated with drilling and  lay the groundwork for a better future.

 

 

Executive Summary

The oil and gas industry is anticipating a boom in natural gas and possibly oil production in Ohio. The mineral wealth that lies under the land can create great private wealth, but in Ohio the one tax that specifically captures a share of that wealth for the people of the state – the severance tax – is low. Ohio ranks 19th among natural gas-producing states and 17th among oil-producing states in production, yet ranked 25th among 35 states in severance tax collections in 2010. Ohio’s rate on gas and oil is the lowest among neighboring states with a similar tax, and among the lowest of states with viable shale formations, or plays, that levy a severance tax.

Oil and gas extraction firms pay the commercial activity tax and local property taxes like other firms; their employees pay income and payroll taxes. These are ordinary costs of doing business and in Ohio, business taxes have been substantially lowered since 2005. The oil and gas industry has the potential to create jobs, enrich owners and investors, and add to the tax base. In so doing, it uses up Ohio’s natural resources, which will then no longer be available to future investors or citizens. It also has the potential to cause public expenditure – on roads, worker training, environmental clean-up and public services. As industry representatives predict a drilling boom, we need to consider the special costs drilling could impose and the special responsibilities this industry has because of its reliance on natural resources that will be depleted. The wealth that lies under the land should be adequately taxed to pay for costs associated with drilling and to lay the groundwork for a better future for residents of the state. 

Would taxation policy similar to that in other states ruin Ohio’s chances for oil and natural gas production? Activity in other states indicates it would not. North Dakota’s oil production averaged over 460,000 barrels per day in September 2011, more than four and one-half times its September 2005 level, although the severance tax rate is 11.5 percent.  Shale gas production is growing in Texas, where the severance tax rate on natural gas is 7.5 percent; Oklahoma, where the rate is 7 percent and Arkansas, where the rate is 5 percent. West Virginia, with a severance tax rate of 5 percent, saw more wells drilled in 2010 than in the biggest year forecast for Ohio between now and 2015. 

The up-front costs associated with a drilling boom go beyond the road maintenance and repair issues under debate in Columbus.  While the up-front costs of new or burdened roads is a pressing problem even now in some Ohio counties, other costs can include traffic control, building and zoning services, schools, water and sewer, social services, fire and police.  In Ohio, with recent budget cuts to local governments and schools, meeting the up-front demands for a rapid development schedule could be tough. Protecting quality of life could be tougher.

Moreover, this drilling boom brings unusual concerns about environmental impact. Today’s drilling involves pumping millions of gallons of water laced with chemicals and other additives into the well (‘hydrofracturing’ or ‘fracking’).  Fracking has been exempted from federal safe drinking water standards, but chemicals used in the process have been found in an aquifer that supplies drinking water in Wyoming, where the technique has been used for some time.  There are also concerns about toxic emissions.

Pollution brings risk of public costs.  In some cases, private drilling firms now provide drinking water to homes where the water supply has been spoiled. If the private firm enters bankruptcy, who provides water?  If the groundwater of a city is polluted, and that pollution has lasting impact, how does that population get water to drink? If people are sickened on a widespread basis, how are medical expenses financed?  Ohio needs to charge more than it currently does for the oil and gas that will be extracted from the land to prepare for these new, unusual risks. 

In this report, Policy Matters Ohio makes the following recommendations to boost the state and provide for the future:

Increase Ohio’s severance tax – The state of Ohio implemented the severance tax in 1972 on a mature oil and gas industry.  As the industry ramps up for robust expansion, the state can expect new costs at a time when existing public services have been deeply cut and need to be restored.   With a 5 percent severance fee on shale gas, Ohio would see increased revenues of $538 million – just on new natural gas production as forecast by industry over the four years between 2012 and 2015. Oil reserves in the shale have not been quantified so projections of revenue are not possible, but the severance tax on oil should be the same as for gas.

Establish a severance tax trust fund: Seven producing states have established trust funds based on severance or royalty earnings to build sustainable wealth for communities today and into the future.  In the case of Ohio, taxes on new oil and gas development could assist with the up-front infrastructure needs associated with drilling, restore some of the cuts to education and otherwise help communities prepare for the realities they will face after the oil boom. Earnings on the funds could support economic development planning for a diversified, post-boom economy in Ohio’s communities, particularly those impacted by the drilling and its related industries.

Press release
Executive summary
Full report
 

Gov. John Kasich optimistic as Ohio unemployment rate drops

by Reginald Fields

COLUMBUS, Ohio – Ohio’s unemployment rate in November posted its largest month-to-month drop in 28 years, a sign that the state’s efforts at job creation are working, said Gov. John Kasich.

The November rate was 8.5 percent, down from 9 percent in October. The unemployment rate was 9.6 percent a year ago.

The rate is lower than the national unemployment rate, which also enjoyed some recent good news, dropping to 8.6 percent from 9 percent in October.

“These things have a tendency to move around and I think in our state we have a tendency to always look at the glass as half empty,” Kasich said Friday. “Well, now it is half full and the sun is up.”

The Republican governor has made job creation and retention the staple of his administration as he wraps up his first year in office. Kasich this week announced more than 500 new jobs coming to a Cincinnati company and on Tuesday will be in the Cleveland area with additional job news.

The administration has worked to improve the state’s credit rating and then followed that with an aggressive marketing plan, enticing companies with a mix of tax credits and grants in return for jobs. Kasich says Ohio is up a net 45,000 private sector jobs from the start of the year.

Democrats quickly assumed some credit for the economic bounce back. They noted that many of those jobs Kasich cited are within the automobile industry in Northeast and Northwest Ohio that were first boosted by President Barack Obama’s auto industry stimulus package.

“Unemployment in Ohio has now gone down since President Obama took office, thanks in large part to his efforts like rescuing the auto industry,” said Ohio Democratic Party spokesman Seth Bringman.

But Policy Matters Ohio, a governmental policy think tank, threw cold water on both Republicans and Democrats with its statement entitled, “Nothing to crow about.”

Policy Matters said the unemployment rate drop has less to do with people finding jobs and more to do with the fact that fewer people are looking for work. The unemployment rate is calculated using the number of people actively looking for employment.

“Many people, particularly during prolonged periods of high unemployment, stop seeking work and drop out of the labor force,” the Policy Matters statement said. It noted that people may have chosen to stay home to raise children or returned to school and thus they are no longer counted among the unemployed.

The think tank noted that while 30,000 fewer people were counted as unemployed by Ohio in November, which drove the rate drop, just 7,000 of them actually found jobs.

Kasich said the rate drop and his jobs announcements are driving renewed optimism that Ohio is headed in the right direction coming off a recession that had pushed the state’s unemployment rate into double-digit territory. He answered critics this way.

“At least we are not going backward. We are going forward and we’re going up. I think we are a lot more active and we have a lot more friendly business environment,” Kasich said.

Even competing for companies that ultimately Ohio didn’t get, like the Sears deal that fell through this week, has companies curious about the state’s new zeal for making itself over as business friendly, the governor said.

“It is just a good sign,” Kasich said. “We’ve played three or four holes but we’ve got a long way to go. We’ve got a lot of golf course to go. I just hope people have a little more optimism.”

The last time Ohio’s unemployment rate dropped by at least one-half percentage point from one month to the next was in July 1983 when it fell to 11.4 percent from 13.1.

Link to story

Dramatic drop in labor force, minimal job growth undercut good news about unemployment rate

Press release

Contact Hannah Halbert, 614.221.4505

Ohio just posted the largest unemployment rate drop in decades, falling from 9 percent to 8.5 percent. Data released today by the Ohio Department of Job and Family Services (ODJFS) from its survey of employers for November 2011 suggests that falling labor force numbers are responsible for the decline in the unemployment rate, not job creation.

While, the number of Ohioans counted as unemployed fell by an estimated 30,000 in November, only 7,000 additional people are being counted as employed. Sharp declines in the number of Ohioans participating in the civilian labor force help to explain the drop in the unemployment rate in the absence of major job growth in employment. Between October and November, 22,000 workers left the labor force, the largest drop this year and down more than 61,000 workers since November 2010.

Overall, recovery in Ohio remains painfully slow. The ODJFS monthly estimates, which are highly subject to revision, show only 6,000 jobs added in November. Since the official end of the most recent recession (June 2009), the state has had abysmal 1.2 percent job growth, adding only 62,600 jobs. This year brought even slower growth at 0.9 percent.

Many people, particularly during prolonged periods of high unemployment, stop seeking work and ‘drop out’ of the labor force. People may choose to care for children rather than continue to look for work, avoiding childcare costs. Some individuals may return to school or retrain for a different career. Others may be forced into early retirement after losing a job and being unable to replace it. Some are simply too discouraged to continue searching, applying, and receiving rejections. These individuals are not counted in the labor force or in the unemployment rate. To be counted as a member of the labor force and in the unemployment rate, an individual must be actively seeking work.

“A shrinking labor force is not good news for Ohio,” said Hannah Halbert, policy liaison with Policy Matters Ohio. “The data released today suggest that more Ohioans are becoming discouraged, the pace of recovery is simply too slow, and the modest gains that are being made are not being felt broadly in our economy.”

Download press release

Full report


Selected media coverage

Gov. John Kasich optimistic as Ohio unemployment rate drops, Cleveland Plain Dealer, December 16, 2011

Jobs gap, Akron Beacon Journal, December 19, 2011