HARRISBURG – Pennsylvania’s historically-low unemployment rate and solid job growth should continue throughout the year, according to projections from independent economists and state economists.
The gross domestic product in Pennsylvania is expected to grow 1.9% in 2020 and 2021, a little less than the 2.6% growth in 2018 and 2.1% last year.
The Independent Fiscal Office is predicting that the state will bring in $35.73 billion in tax revenue by the end this fiscal year, ending June 30 – $220 million more than the office had previously projected.
Pennsylvania’s unemployment rate in December hit 4.5%, up from 4.3% in November, but identical to the unemployment rate in December 2018.
“Pennsylvania’s unemployment rate fell rapidly in the first half of 2019, hitting a new record low of 3.8%. As more workers have joined the labor force in recent months, the unemployment rate has edged higher,” according to a 2020 economic outlook for the state completed by TD Economics. “This recent labor force boost will provide added fuel for the employment engine in the near-term. Further out, however, a slow-growing and aging population will limit the availability of workers. As a result, economic growth is expected to slow to around 1.7% over the next two years.”
The report noted that Pennsylvania’s economy is buoyed by the professional and tech sectors, primarily in the regions around Pittsburgh and Philadelphia.
Pennsylvania's senior population has been growing at a rate of 2% a year since 2012, and that is prompting healthcare networks to invest in more projects, according to Kiplinger Finance’s economic outlook for Pennsylvania. “UPMC is investing $2 billion to build three new hospitals in the Pittsburgh area, an immediate boon for the area's construction industries,” Kiplinger reported.
Minimum wage debate
While the outlook appears relatively rosy heading into the year, business groups and Republican lawmakers say the economic implications of several policy proposals put forth by Gov. Tom Wolf could hurt the business climate.
That includes Wolf’s renewed call for a tax on natural gas drilling, his call for an increase in the minimum wage and his plan to enroll Pennsylvania in the Regional Greenhouse Gas Initiative.
Wolf last fall had indicated he’d support legislation that would have increased the minimum wage from $7.25 to $8 by July and to $9.50 by 2022. To coax lawmakers to act, Wolf promised to hold off on a plan to elevate the income floor used to determine when employees are eligible for overtime. The federal government in January increased the limit so that any workers earning less than $35,568 must be paid overtime if they work more than 40 hours in a week.
The state Senate passed legislation that would have increased the minimum wage, but the measure has been stalled in the House. In response, the Wolf Administration has moved toward increasing the overtime threshold from the federal limit to $45,000 by 2022.
The governor has also moved away from the $9.50 an hour minimum wage and resumed calling for a $12 minimum wage. Under Wolf’s proposal, Pennsylvania’s minimum wage would move to $12 on July 1, with 50 cent increases each year until it reaches $15 an hour in 2026.
“Forcing people who work full-time to get by on $15,000 a year doesn’t just limit what they can build for themselves and their families. It limits what they can contribute to our shared prosperity,” Wolf said in his February budget address to lawmakers. “That’s why 21 states have already increased their minimum wage this year alone. Nobody out-works the people of Pennsylvania – they deserve the same fair wage.”
In his budget, Wolf also renewed his commitment to enroll Pennsylvania in a cap-and-trade program intended to limit greenhouse gas emissions. The states in the Regional Greenhouse Gas Initiative – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont – set a cap on total CO2 emissions from electric power generators in their states.
While his spending proposal doesn’t include a new tax on drilling, the governor has been campaigning to get the Legislature to enact such a tax to cover the debt payments for billions in borrowing to pay for infrastructure improvements.
All those proposals face stiff resistance.
“We remain concerned, however, about the administration’s aggressive proposal to more than double the state’s minimum wage to $15, which will increase labor costs and could lead to significant job loss. A recent report by the nonpartisan Congressional Budget Office found that a $15 minimum wage could lead to as many as 3.7 million lost jobs,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry. “Rather than punitive government mandates that will hurt job creation and decrease the number of entry-level positions in the Commonwealth, lawmakers should pursue policies that target support to low-income families without risking jobs.”
Lawmakers are balking at the governor’s move to enroll in the Regional Greenhouse Gas Initiative, saying it will hut the state’s fossil fuel industries.
“If not prevented by the General Assembly or the courts, (Wolf’s move) will lead to a discriminatory and job killing tax on all coal and gas fired electric generation plants in the Commonwealth,” said state Sen. Gene Yaw, R-Lycoming County, the chairman of the Senate Environmental Resources and Energy Committee.
Yaw said that committee will hold a series of hearings around the state “to force the Wolf Administration to answer the hard questions about the immediate and irreparable harm triggered by the RGGI carbon tax."
The first hearing is scheduled for March 18 in Harrisburg.