After a massive jump in employment to kick off the year in
January, Illinois has faced two consecutive months of employment losses.
This places Illinois in the bottom half of U.S. states for first quarter jobs
growth, which is more bad news for the state in the wake of the April 18 Census
data revealing Illinois-based metro areas all suffered net population losses in
2018.
In March, the Prairie State shed 2,800 jobs, with the largest loss coming from
the professional and business services sector, down 4,200 jobs (-0.4%).
Other sectors losing jobs were trade, transportation and
utilities which lost 3,000 jobs (-0.2%); construction shrank by 1,600 jobs
(-0.7%); the information sector reduced payrolls by 500 jobs (-0.5%); and mining
shed 100 positions (-1.3%).
While Illinois experienced job losses on net during March, some industries
expanded their payrolls. Financial activities created 1,400 new positions
(+0.3%); manufacturing added 1,400 jobs (+0.2%); other services expanded
payrolls by 1,200 (+0.5%); leisure and hospitality added 1,200 jobs as well
(+0.2%); education and health grew by 1,100 jobs (+0.1%); and government added
300 jobs (+0.04%).
The March decline in jobs resulted in Illinois’ unemployment rate rising to 4.4
percent, one of the highest in the nation.
2019 so far
Despite two consecutive months of employment losses, Illinois job creation
figures remain positive in 2019. The state has added 13,100 jobs, primarily
driven by gains in manufacturing, professional and business services, and
education and health sectors.
While the addition of 13,000 jobs is welcome, 2019 is in line
with a long-standing trend of Illinois’ jobs growth lagging the nation.
Through the first quarter of 2019, Illinois ranks 31st in total employment
growth.
During the first quarter of 2019, Illinois lagged most other
states in terms of job creation. Making matters worse, Illinois just received
bad news from the U.S. Census Bureau: the state’s population loss spread to all
Illinois-based metro areas, all 10 of which suffered net population losses in
2018. The primary loss is in prime working-age residents (ages 25-54) seeking
opportunity outside Illinois.
Starting 2019 with anemic job growth creates little hope Illinois will avoid a
sixth straight year of population decline. Residents mainly leave Illinois’
because of the labor market, which has been crushed by the state’s unfriendly
tax policy and business climate.
Following peer-reviewed methodology published in the Journal of Labor Economics,
which take into account the effects of climate, age and labor market conditions
on migration decisions, IRS data reveal Illinois’ poor labor market has been the
primary driver of outmigration since 2006, accounting for 57 percent of
Illinois’ net migration losses to other states (see Appendix A).
[to top of second column] |
The state’s lackluster economy is directly
responsible for the loss of most residents in the past decade. The
exodus may get worse, as the 2017 tax hike continues to hurt the
Illinois economy, and the state’s labor market continues to fall
behind. By costing the state thousands of jobs and billions of
dollars in economic activity, the recent tax hike has made the state
less attractive for families. State lawmakers cannot continue hiking
taxes if they want families to move to or stay in Illinois.
Reversing the trend: Illinois should rein in spending while
protecting core services, not hike taxes
Illinois state lawmakers have the opportunity to put the state on a
path toward a more prosperous future through policy reform. But what
kind of reform should a shrinking state pursue?
One clear mistake, given the resident exodus, would be scrapping
Illinois’ constitutionally protected flat income tax.
Americans are fleeing high-tax, progressive income tax states for
more competitive tax environments. These states have also been the
most successful at creating jobs, which continues to be a sore spot
for the Illinois economy.
The progressive income tax constitutional amendment pending in the
General Assembly would only aggravate Illinois’ outmigration crisis.
Illinoisans – and particularly those on whom Gov. J.B. Pritzker
wants to raise taxes – are already leaving at a record pace.
Pritzker’s progressive income tax rate proposal would raise taxes on
small businesses, subjecting them to one of the highest tax rates in
the nation. That will make it harder for struggling Illinoisans to
find a job and result in even more workers leaving Illinois.
Instead, lawmakers should focus on reining in government spending
through a spending cap. A spending cap constitutional amendment
already earned support from Senate Democrats this year.
Controlling pension costs is a critical component of holding down
spending. Pension obligations, which official estimates put at $133
billion and other analyses peg at as much as $250 billion, now eat
up more than a quarter of the state budget without delivering the
services taxpayers value. An amendment to the Illinois Constitution
that protects already-earned pension benefits, but allows for a
slower growth in accrual of future benefits, would help reduce the
state’s pension debt.
Both proposals are part of the Illinois Policy Institute’s five-year
plan to balance the state budget, pay down debts and provide a path
to tax relief.
Instead of more tax hikes on Illinois families and businesses, state
lawmakers must cut spending to a level taxpayers can afford. Only
then can Illinois foster investment and job creation, again making
Illinois a place residents want to be.
Click here to respond to the editor about this article |